Saturday, 30 January 2010

Italy vs. Finland (a statistical approach)

I've come across an economic measure called Gini index, the index is commonly used as a measure of inequality of income or wealth. A low Gini coefficient indicates a more equal distribution, with 0 corresponding to complete equality, while higher Gini coefficients indicate more unequal distribution, with 1 corresponding to complete inequality.

So I got interested in what the Gini coefficient might be in Finland and, as expected, it's not that high. But the most interesting thing is when it is compared to the italian one and its evolution during last years (unfortunately data is there until 2005 only).

It's incredible to see that after the introduction of the Euro in Italy the inequality has increased of 4 percent points while in Finland only of 2 points (with an absolute difference of 7%).

This basically means that after 2001 the rich are richer and the poor are poorer (and this is not big news). But more in Italy than in Finland.

Another quite interesting figure is the one that photographs the gross domestic product (GDP) per capita in purchasing power. GDP is a measure for the economic activity. It is defined as the value of all goods and services produced less the value of any goods or services used in their creation. The volume index of GDP per capita in Purchasing Power Standards (PPS) is expressed in relation to the European Union (EU-27) average set to equal 100. If the index of a country is higher than 100, this country's level of GDP per head is higher than the EU average and vice versa. Basic figures are expressed in PPS, i.e. a common currency that eliminates the differences in price levels between countries allowing meaningful volume comparisons of GDP between countries.

If we check this graph it's pretty evident (and also stunning) how after the introduction of the common european currency the average 'money to spend' of italians has been dropping like hell while in Finland remained mostly unchanged. With an end result of 15% difference between the two countries.

The whole post was an attempt to proof (mostly to myself) my personal perception that while in Italy people have less money to spend and there are still a lot of people that go around in a Ferrari, in Finland, while there are obviously poor and rich, the average guy can still live decently and the distance between poor and rich is not as unfair as in Italy.

(*) Data source:
Gini index
GDP per capita in PPS

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