## Monday, February 09, 2015

### Income Inequality In OECD Countries

I recently took another look at data, available from the Organization for Economic Co-operation and Development (OECD), on income inequality. The Gini coefficient is available on countries in the database, under measures of Social Protection and Well-being. Under that menu, expand the sub menu for Income distribution and poverty, and select inequality. You can see the Gini coefficient (at disposable income, post taxes and transfers) displayed, by country, for various years. Table 1 shows the most recent numbers, sorted from countries with the most equal distribution to the least equal. For one way of thinking about it, the United States is not number 1, since the US is exceeded by Turkey, Mexico, and Chile.

 Country Gini Coefficient(Non Provisional) Year Slovenia 0.245 2011 Norway 0.250 2011 Iceland 0.251 2011 Denmark 0.253 2011 Czech Republic 0.256 2011 Finland 0.261 2012 Slovak Republic 0.261 2011 Belgium 0.264 2010 Sweden 0.273 2011 Luxembourg 0.276 2011 Netherlands 0.278 2012 Austria 0.282 2011 Switzerland 0.289 2011 Hungary 0.290 2012 Germany 0.293 2011 Poland 0.304 2011 Korea 0.307 2012 France 0.309 2011 Ireland 0.312 2009 Canada 0.316 2011 Italy 0.321 2011 Estonia 0.323 2011 New Zealand 0.323 2011 Australia 0.324 2012 Greece 0.335 2011 Japan 0.336 2009 United Kingdom 0.341 2010 Portugal 0.341 2011 Spain 0.344 2011 Israel 0.377 2011 United States 0.389 2012 Turkey 0.412 2011 Mexico 0.482 2012 Chile 0.503 2011

The Gini coefficient is a measure of inequality, with a higher Gini coefficient denoting a more unequal distribution of income. It is defined as follows: sort the population in order of increasing income. Plot the percentage of income received by those poorer than each value of income against the percentage of the population with less than that value of income. This is the Lorenz curve, and it will fall below a line with a slope of 45 degrees going through the origin. The Gini coefficient is the ratio of the area between the 45 degree line and the Lorenz curve to the area under the 45 degree line. A Gini coefficient of zero indicates perfect equality, while a Gini coefficient of unity arises when one person receives all income and everybody else gets nothing. Consequently, the Gini coefficient lies between zero and one.