Estimating Gini Coefficient from Grouped Data Based on Shape-Preserving Cubic Hermite Interpolation of Lorenz Curve

Abstract

The Lorenz curve and Gini coefficient are widely used to describe inequalities in many fields, but accurate estimation of the Gini coefficient is still difficult for grouped data with fewer groups. We proposed a shape-preserving cubic Hermite interpolation method to approximate the Lorenz curve by maximizing or minimizing the strain energy or curvature variation energy of the interpolation curve, and a method to estimate the Gini coefficient directly from the coefficients of the interpolation curve. This interpolation method can preserve the essential requirements of the Lorenz curve, i.e., non-negativity, monotonicity, and convexity, and can estimate the derivatives at intermediate points and endpoints at the same time. These methods were tested with 16 grouped quintiles or unequally spaced datasets, and the results were compared with the true Gini coefficients calculated with all census data and results estimated with other methods. Results indicate that the maximum strain energy interpolation method generally performs the best among different methods, which is applicable to both equally and unequally spaced grouped datasets with higher precision, especially for grouped data with fewer groups.