Georgian Inequality Coefficient Is Close to Latin American Countries
29 September, 2011
Georgian Inequality Coefficient Is Close to Latin American Countries

Georgia outweighs its Caucasian neighbor countries in terms of income inequality and stands closer to Latin American countries, which bespeaks of the absence or small size of middle class in the country.
The size of middle class is an acute problem in Georgia. Skeptics worry that it does not exist at all while official statistics assure it does. However, Geostat, official statistics body, does not provide with the conspicuous data on the percentage of middle class. It provides with the

share of population below poverty level [that increased by 3.3% since 2007 to 9.7% in 2010] but what is the remaining 90.3% of Georgian population is not quite clear as Geostat does not employ the so called Gini Coefficient [named after Italian Statistician Corrado Gini] that is the most widely used and understandable indicator for measuring income equality of population.
Gini Coefficient is a mathematical concept, measuring equality from 0 to 1 and is often presented as a percentage from 0 to 100. Low indicator of Gini Coefficient means high income equality in a society and vice versa. And Georgia’s Gini coefficient standing at 40.8 [as Economic Policy Research Center (EPRC), a non-governmental watch-dog, calculated within the framework of its quarterly report of Georgian Economic Outlook, being carried out since 2011] is quite high, which bespeaks of serious social and economic challenges in the country.
The first issue of the EPRC paper covering the first half of the year was aired on September 23, 2011 and its major topic was inequality and Gini coefficient.
According to it, Georgian authorities often focus on such concepts as income, both national and per capita, overlooking other important indicators, such as the economic inequality, which is indispensible for a realistic assessment of living standards and the level of poverty in the country.
“It is precisely the inequality in the income growth across the country’s population that represents one of the major challenges for improving the standard of living in Georgia, and as such, deserves a heightened attention from the experts as well as the relevant state institutions,” Nino Evgenidze, a spokesperson of EPRC, told Georgian Journal.
A comparison helps better assess the picture: Scandinavian countries have an indicator of around 25, while the continent of Africa is characterized by a relatively high indicator (around 70). Even within the region, where the post-Soviet countries likewise have high indicator, Georgia still outweighs some of its neighbors in terms of inequality: Azeri and Armenian Gini coefficient is 16. 8 and 30.2 respectively.
However Georgia has a lower inequality as compared to Russian Federation (43.7) and Turkey (41.2) and Georgian indicator closely resembles the coefficients of Latin American countries (Venezuela 43.4, Uruguay 47.1, Columbia 58.5) characterized by the absence or a small size of middle class, EPRC experts say.
A high indicator of income inequality is troubling, EPRC warns, as far as there is a negative relationship between inequality and human development while the basic economic experience dictates that flattening of the equality indicator might be directly associated with improvements in the overall health and education outcomes, as well as economic growth.
Notwithstanding one existing point of view that a high level of inequality might give people incentive to work harder and foster entrepreneurial activities, the wealth of international experience shows that the costs related to high level of income inequality far exceed any benefit that it may bring about in the country.
High levels of inequality may lead to lower social cohesion and civic engagement, which eventually translates into higher political instability. Also numerous studies find direct correlation between the inequality level and crime rate (especially homicides), mental health problems, and teenage pregnancy.
Serious inequality constrains government to use important market mechanisms, such as changes in prices for public service or fines, since it may lead to even deeper inequality by causing overwhelmingly stronger deprivation among the poor citizens.
“Even though a successful market economy cannot function and develop without incentives that imply some inequality of income, we have argued that a high level of income inequality also poses a problem to economic development. We believe that the problem of income inequality needs to be addressed with due diligence. The government bodies should carefully assess this issue and decide whether or not the distribution of income deemed to be sub-optimal,” EPRC experts say.
If so, special polices should be directed towards ameliorating the inequalities. There are two basic approaches to address the issue – changing the factors that produced the inequality, or compensating the outcomes.
Georgian government mostly addresses to the less effective compensation-based method by making direct payments or transferring benefits in kind (payments made in the form of providing “free” goods and services) to less privileged households. This method did not alleviate the problem in fact as the payments are very minimal.
The best world practice shows the cause-fighting method is much more effective. Some governments have employed progressive taxation– taxing the rich proportionally more than the poor to reduce the amount of income inequality in society, others chose instituting minimum wage legislation to raise the income of the poorest workers, or targeted on education accession to maintain the competitive environment.
The EPRC recommends Georgian government to undertake the cause-fighting policy [rather than subsidies] that usually is more effective as the practice shows and that Georgian authority has never attempted.

Print
Other Stories
The World Digital Mining Summit to be held in Georgia
The summit is scheduled to take place between 21st-23rd September in the Hualing Hotel, Tbilisi, Georgia.
Galt and Taggart - Tourism Boom Continues in Georgia
Tourism has become one of the key drivers for the Georgian economy. Galt and Taggart has recently published research about the Georgian tourism sector in the first half of 2018.
"The worst dream for Putin is that Russians want to live in Georgia"
This year, visitors to the Adjara region would notice that there is a boom in construction in and around Batumi.
Underground gas storage facility to be built in Georgia
KfW, a German government-owned development bank signed a EUR 150 million promotional loan with the state-owned Georgian Oil and Gas Corporation (GOGC) for the construction of the first underground gas storage facility in Georgia.
New gambling rules for Georgia
Georgian lawmakers are preparing a new draft law relating to online-casinos and gambling that will seek to curb gambling addiction in Georgia.
How expensive is it to visit Georgia?
The Georgian Lari (GEL) is the official currency of Georgia and is the only legal means of payment in the entire territory of Georgia.
Trade with the EU and the Commonwealth of Independent States (CIS) has grown significantly
Trade with the EU and the CIS has grown by 26% and 33.5 % respectively, says GeoStat, the Georgian National Statistics Office.
The unemployment rate decreases in Georgia
The unemployment rate decreased in Georgia by 1,9% and amounted to 12.1% in the 2nd quarter of 2018 compared with the previous quarter,
Memorandum of Understanding to be signed between Georgia and Malaysia
According to the Georgian Ambassador to Malaysia Nikoloz Apkhazava, Georgia plans to sign a Memorandum of Understanding (MoU) with Malaysia.
“Blauenstein Georgia” due to expand in Georgia
“Blauenstein Georgia” is planning to open more shops in Georgia. It is an agriculture company that sells meat products, meat and convenience food.
The amount of Direct Foreign Investment rises in Georgia
According to the information of the National Statistics Office of Georgia, the amount of direct foreign investment in Georgia has risen
It’s going to get  harder for foreigners to get residence permit in Georgia
It’s going to get harder for foreigners to get permit of residence in Georgia.
Mziuri Park in Tbilisi to be renovated soon
It was the dream of prominent Georgian writer Nodar Dumbadze that when the original Mziuri park was constructed and opened in 1892 that it should be a park for children,
Winemakers to produce Kvanchkara in its place of origin - Racha
Khvanchakara is a semi-sweet Georgian red wine which originates from Racha, in the western part of Georgia. Kvanchkara is made of two types of grape Mujuretuli and Aleksandrouli.
The level of Georgian wine and Chacha exported has increased
The National Wine Agency of Georgia has recently published statistical information about the level of Georgian wine and Chacha exported between January and July, 2018.
New fire engines to be Manufactured in Georgia
The Acting Head of the Emergency Management Agency Shalva Khutsishvili said that the old Zili fire engines (which were made in the USSR) will be phased out and replaced with new ones, manufactured in Georgia.
Georgia witnesses a record number of tourists
The Georgian National Tourism Administration publishes statistical information about international visits to Georgia.
Canadian businessman plans to build a hotel in Bakhmaro
Canadian businessman Vadim Malishev plans to build a hotel in Bakhmaro resort, Guria, in the western part of Georgia.
Coffee Factory will open in Tbilisi in October
The first coffee factory (which will be located on the Kakheti highway) in Tbilisi will open in October.
Places in Georgia where real estate is the most expensive
The real estate market in Georgia is growing annually. In Tbilisi as well as other regions of Georgia new developments are increasingly taking place.
How much does a vacation cost in Tbilisi?
It is the middle of summer and those who have not yet taken a vacation are looking for an appropriate place for sure!
The price for extreme sports in Georgia
Georgia offers a variety of options to extreme sport lovers.
The number of Georgians who own property abroad increases
The number of foreign properties owned by Georgians is increasing.
How much does Taxi cost in Tbilisi?
Stories how Taxi drivers try to deceive passengers and charge them with more money than they should pay are known for everybody all over the world.
What are the highest paid areas in Georgia
According to the data collected by the National Statistics Office of Georgia in the first quarter of 2018 the highest paid jobs in Georgia are found in the financial and insurance fields.
PHOTO OF THE DAY
Exchange Rates
GEL Exchange Rate
Convertor
24.09.2018
25.09.2018
USD
1
USD
2.6216
2.6226
EUR
1
EUR
3.0854
3.0868
GBP
1
GBP
3.4584
3.4416
RUB
100
RUB
3.9340
3.9814
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
USD
1
USD
2.6226
EUR
1
EUR
3.0868
GBP
1
GBP
3.4416
RUB
100
RUB
3.9814