Most secondary school economics syllabus include the topic of inequality and the gini-coefficient which has now become more prevalent in the minds of government policymakers. The gini-coefficient is derived from the same information used to create a Lorenz Curve. The co-efficient indicates the gap between two percentages: the percentage of population, and the percentage of income received by each percentage of the population. The resulting number ranges between:
- 0 = perfect equality where say, 1% of the population = 1% of income, and
- 1 = maximum inequality where all the income of the economy is acquired by a single recipient.
The global Gini increased from 0.60 in 1820 to 0.72 in 1910, again 0.72 in 2000 and 0.67 in 2020 (see Figure 2.3). The decline in inequality was prevalent after the 2008 financial crisis. In all cases, global indicators indicate very high inequality levels in 2020 (close to those observed around 1900-1910, and substantially larger than those observed in 1820).
The graph below (Figure 2.1) gives the basic breakdown of the shares of world income going to the global top 10%, middle 40% and bottom 50% groups between 1820 and 2020. The main points are:
- Global inequality has always been prevalent
- Top 10% income approximately 50-60% of total income between 1820 and 2020
- Bottom 50% share remained between 5-15%
Share of National Income by Country
Note that South Africa has the most unequal distribution of income whilst New Zealand is 142 out of 167 countries.
Source: World Inequality Report 2022
For more on Inequality view the key notes (accompanied by fully coloured diagrams/models) on elearneconomics that will assist students to understand concepts and terms for external examinations, assignments or topic tests.