Automatically translated from Basque, translation may contain errors. More information here. Elhuyarren itzultzaile automatikoaren logoa

The Gini Index Hole

The Gini index is one of the best known indices when measuring differences in income distribution. This centenary coefficient tells us what income distribution is like in a given country, taking values between 0 and 1. In a country of full equality, it would take value 0 and at the other end, in a country of full inequality, value 1. In reality, of course, the coefficient moves between the intermediate values and is especially useful to establish comparisons. In other words, it is very useful to compare the differences between countries or to analyze the trend over time of the degree of inequality of a particular country.

In this sense, the contribution of the Gini index has been very important: it has placed the traditional Gross Domestic Product rankings upside down. As GDP measures the level of income, it is related to the average income level of countries and, therefore, to the level of poverty. Differences, on the other hand, are related to distribution. In the same way that in very poor countries there can be great inequalities, in countries with a high level of income large differences can be concealed, such as Brazil or the United States.

The contribution of the Gini index is very important: it has put the rankings upside down according to the usual GDP. As GDP measures the level of income, it is related to the average income level of countries and, therefore, to the level of poverty. Differences, on the other hand, are linked to sharing, reflect the inequality that exists in society as a whole, but it tells us nothing about what is happening within society.

The Gini index reflects the inequality that exists in society as a whole, but it does not tell us anything about what happens within society. This limit was warned at the beginning of the 21st century by Chilean economist José Gabriel Palma. The study of what remained of each country with the extremes of the population carried out an exhaustive study. During his career he realized the curious political phenomenon: in all the countries of the world the middle class acquires an almost equal part of the wealth, that is, half of it. He demonstrated with his data that the essence of inequality lies at the extremes. In other words, the key is the distribution of the other half of the wealth: how the other half of the cheese is shared between the poorest 40% and the richest 10% in society.

In the countries of South America there are more differences in income than in the Nordic countries. But in both regions the richness corresponding to the middle class is similar: the ability of the middle class to bring half of the cheese is repeated by countries. On the contrary, the capacities of the richest and the poorest behave very differently in each country.

This nuance is very useful because it allows us to evaluate public policies. Regarding Chile, Palma clearly sees the defeat of the center-left governments of the last decades: despite attempts to reduce inequalities, the richest 10% has remained firm. That is why inequality has been reduced very little in Chile, and if the new left has triumphed, it is because it has reduced poverty thanks to the minimum wage and the family exchange.

The results of Palma put on the table that in order to reduce inequalities it is necessary to allocate 10% of public policies to that millionaire: reform of the structural tax, monitor and sanction tax fraud in depth and put an end to tax havens.

Jumping from Chile to us, let's look at our organizations. They are very adept at applying cuts to the detriment of the poorest population and at recognising more and more privileges to the elites. In the CAV and in Navarre, for this we only have to review the Company Tax. Instead of applying it to the poorest, they channel the cuttings down to diminish the tools that the richest end has to appropriate much of the cheese.

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