Gini coefficient

The Gini coefficient is used in this article to measure the level of inequality of income in a country. The Gini coefficient measures the extent by which a distribution deviate from the perfect equal distribution and is associated with measuring the deviation of the distribution of income.

The coefficient expresses a value between 0 and 1 (or in some cases 100) where on the matter of distribution of income, the value of 0 express perfect equality among everyone in a country, meaning that everybody has the same income. Similarly, the value of 1 express full in-equality if one individual has all the income. Of course, both extreme scenarios are hypothetical, however the lower the value of the Gini coefficient, the more equal the income is distributed between individuals in a country.

The figures below demonstrate that most of the Nordic countries have a more equal distribution of income that the average of the EU countries. It is therefore interesting to observe that the extremes of the Nordic countries are represented by the smaller Nordic populations, with Greenland and Åland Islands in the higher end, and Faroe Islands in the low end, therefore having the most equal distribution of income among all the Nordic countries.

It also demonstrates that the level of distribution within each country, as measured by the Gini coefficient, does not change much over time, but develops perhaps towards more equal societies. This, however, can be a misinterpretation because the Gini coefficient does not take structural changes into consideration, and the effects of younger individuals often earning less than older individuals can affect the measurement of distribution of income.