Question

Explain what these statistics are: Gini index, Quintile analysis, and Pareto Criterion.

Answer 1

Gini Index:

This index developed by Italian statistician Corrado Gini in 1921 and is based on Gini Coefficient. This Coefficient is a popular statistical measure to gauge the rich-poor income or wealth divide. It measures inequality of a distribution of income or wealth within nations or States. Its value varies anywhere from 0 to 1; Zero indicating perfect equality and One indicating the perfect inequality. Gini Coefficients can be used to compare income distribution of a country over time as well. An increasing trend indicates that income inequality is rising independent of absolute incomes.

Quintile analysis:

A quintile is a statistical value of a data set that represents 20% of a given population, so the first quintile represents the lowest fifth of the data (1-20%); the second quintile represents the second fifth (21% - 40%) and so on. Quintiles are often used to create cut-off points for a given population: a government sponsored socio-economic study may use quintiles to determine the maximum wealth a family could possess in order to belong to the lowest quintile of society. This cut-off point can then be used as a prerequisite for a family to receive a special government subsidy aimed to help society's less fortunate.

Pareto Criterion:

The Pareto principle also known as the 80/20 rule. This rule states that, for many events, roughly 80% of the effects come from 20% of the causes. It is a common principle in business management; e.g., "80% of sales come from 20% of clients. In Economics view only 20% people have 80% wealth, or In Production Process if we concentrate on major 20% problems, 80% problems solve automaticaly.