Question

What are the channels, pathways, or mechanisms through which GDP per capita affect the gini coefficient?

Answer 1

The GDP per capita shows the level of economic growth in an economy. The Gini coefficient is a measure of inequality as the lower the Lorenz curve sinks the greater the Gini coefficient and hence the higher the level of inequality.If GDP per capita declines then this means that people in general are poorer but could be the case that the income levels of the rich increase but those of the poor decline at a faster rate. This will increase inequality and so worsen the Gini coefficient further. GDP per capita thus effects the Gini coefficient through the spread of income towards the rich and away from the poor. This means a larger share of the income is held by a smaller portion of the population and this raises inequality and increases the Gini coefficient.