Gini Index. Inequalities in Italy and Europe

How do we measure inequalities?

The GINI index, created by the Italian sociologist Corrado Gini, can be used to measure how the distribution of wealth and income deviates from an ideal distribution of total equality.

Gini Index

The index is calculated as A / (A + B) and returns a value between zero (total equality) and one (total inequality). It is also used as a 0-100 percentage. It can also be measured before and after taxes and transfers, thus showing the effects of taxation / welfare policies on inequality.

Gini’s index: inequality in Italy

Bottom of the post I am showing you an interactive visualization of the Gini Index 2008-2017 I created from the Eurostat data set (updated January 2019) on the distribution of income in European families after taxes and transfers (equivalent available income).

It is worth noting that, while Germany and France have managed to improve their Gini Ratio between 2007 and 2018, Italy has instead deteriorated, as well as Spain and Sweden. Italy and Spain (but not Sweden) also have a worse index than the EU average.

What is needed to improve the Gini index in a country? Basically a fair, progressive and well-functioning taxation / transfer system, low tax evasion rate, a growing economy, better jobs and better education.

They are not trivial objectives, but every governement aiming to reduce inequalities should strive to improve the Gini Index and the related factors.

I listed in green programs that are improving the index, in red programs that are making it worse.

It is also worth noting that the flag program of the 5-star movement, the citizenship income, seems to be moving in the right direction (supporting those living below the poverty line) but with a really poor implementation. In fact, 1/3 of the total transfers in Italy goes to families with above-average incomes (see also Dataroom by Milena Gabanelli), which means that 1/3 of the transfer payments make the Gini index worse, instead of improving it. Any program to combat poverty should therefore first recover these misallocated funds and then provide for transfers and redistribution.

Nonetheless, I decided to list the “reddito di cittadinanza” program in green, hoping for a late fine-tuning by the government in the coming months. We hope for the best (but let’s prepare for the worst). The Dataviz is optimized for full screen viewing (click on the button at the bottom right).