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GDP vs GINI



We have to ask that what developed country is. According to World Bank, a high-income economy is defined by World Bank as a country with a gross national income per capita $ 12,056 or more in 2017, calculated using the Atlas Method. While the term "high income" is often used with " First world" and "developed country", the technical definitions of these terms differ (World Bank,2018) Of course, the gross national income per capita is not really enough to demonstrate people's, who live in high-income countries, welfare level. Therefore, in economics, we use the Gini Coefficient to measure the distribution of income. 

 Gini Index

 The coefficient ranges from 0 to 1 with 0 representing perfect equality and 1 representing perfect inequality. 




A country can have a high income, but it does not mean that in a country every single person gets the same living standard. Firstly, we have to check GDP per capita of countries and then we ought to check the Gini Index showing us that how fair is equality of opportunity. The U.S is the best example for it. In the U.S, GDP per capita is $57,797 ( average of OECD is $ 42,256). In 2018, $57,797 is superb GDP per capita. The U.S citizens must have a high standard, yet not every American citizen has it because of unfair distribution of income.





First of all, we should look at the Gini Index. According to the Gini coefficient, the U.S third worst country in OECD for income inequality. Namely, the U.S has good income and economic growth, yet some people earn much more than other citizens, which means the American government has to make a legislative regulation to fix inequality income. 


How is that possible? At first, the American government should focus on taxation on income. Who earns more money, they should pay more tax than others because if rich people and poor people pay tax in the same rate, then, of course, poor citizens lose money from disposable income and their life standard decrease. In conclusion, in the long-term, that influences the countries economy due to disposable income diminishing. 


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