Named after Italian statistician , the Gini coefficient is a way to measure the income distribution of a population.

The value for the Gini coefficient ranges from 0 to 1 where higher values represent greater income inequality and where:

• 0 represents perfect income equality (everyone has the same income)
• 1 represents perfect income inequality (one individual has all the income)

You can find a list of Gini coefficients by country .

The following step-by-step example shows how to calculate a Gini coefficient in Excel.

Step 1: Enter the Data

First, we must enter values for two columns: the cumulative population % and cumulative income % of individuals in a certain country:

Here’s how to interpret the values:

• The bottom 20% of individuals in this country account for 10% of the total income.
• The bottom 50% of individuals in this country account for 31% of the total income.
• The bottom 60% of individuals in this country account for 40% of the total income.
• 100% of individuals in this country account for 100% of the total income.

Step 2: Calculate Areas Under Lorenz Curve

Next, we need to calculate the individual areas under the , which is a curve we use to visualize the distribution of income in a country. 

In our example, we’ll type the following formula in cell C3:

=(A3-A2)*(B3+B2)*0.5

We’ll then copy and paste this formula down to every remaining cell in column C:

Step 3: Calculate Gini Coefficient

=1-2*SUM(C3:C6)

The following screenshot shows how to use this formula in practice:

The Gini coefficient for this population turns out to be 0.226.

This is an extremely simple example of how to calculate a Gini coefficient but you can use these exact same formulas to calculate a Gini coefficient for a much larger dataset.