Yes, 0 is complete equality and 1 is complete inequality; but, in between, what do they mean, really?

What meaningful distinctions do intermediate values convey? I keep on trying to gain intuition, and I fail—or rapidly lose it when I do think I have gained some…

Give a gift subscription

Earlier this semester, I put this chart from Milanović, Lindert, & Williamson (2011)
<https://piketty.pse.ens.fr/files/MilanovicLindertWilliamson2011.pdf> up in front of some of my students:

Share

And then I felt as though I had to give them some intuition as to what the vertical axis on the damned thing meant—what a Gini Coefficient actually means.

I felt I need to do so because I do not have much intuition for that, and everytime I think I have gained some, I then find that I have rapidly lost it.

Yes, a Gini of 0 is complete equality. Yes, a Gini of 1 is complete inequality—one person has all the [income, wealth, consumption]. But was China’s Gini of 0.25 in 1880 meaningfully different from complete equality? Was Holland’s 1732 Gini of 0.62 meaningfully different from complete inequality? And did life in Brazil in 1872, with a Gini of 0.43, as far as inequality is concerned, feel meaningfully closer to China or Holland—or was it qualitatively as well as quantitatively equally different from the two?

Here is what Corrado Gini’s definition of the coefficient says that it means:

Read more