Friday, December 14, 2012

Bowl Payout Inequality

Last year the Huffington Post had an article on bowl game payouts and a map of those teams that received bowl game payouts and their relative size.  What the article does not do is measure the amount of NCAA Bowl payout inequality, so I thought that I would take up the gauntlet and measure the degree of income inequality among NCAA Bowls for 2011.  To do so, we need a measure of inequality, and a well known measure is called a Gini coefficient.

The Gini coefficient measure how the distribution of income (or in this case NCAA bowl payouts) deviates from a perfectly equal distribution.  The Gini coefficient is calculated by looking at the  population distribution (in this case the 70 bowl participants in 2011) and relating that to the distribution of income (or bowl payouts).  A Lorentz curve plots the results, which is the red line below for NCAA Bowl payouts in 2011.  The blue line represents a perfectly equal distribution.

The area between the blue and red lines above is the portion of inequality, so if the red and blue lines are the same, then income is perfectly equally distributed and the Gini coefficient equals 0, where if only one team receives all the bowl payouts, then the distribution is perfectly unequally distributed, and the Gini coefficient equals 1.

Running the numbers (I will post next week a step-by-step guide on how to calculate this), I find that the Gini coefficient for 2011 equals 0.503.  Is a Gini coefficient of 0.503 high or low?  To give some perspective, I downloaded the Gini Index (Gini coefficient * 100) from the World Bank and calculated the percentage of observations that had a lower level of income inequality for various nations around the world, and found that since 2000 about 75% of those nations had a more equal distribution of income than NCAA bowl payouts.  Yes, nations such as Iraq have a more equal distribution of income than the NCAA Bowl payouts of 2011.

1 comment:

  1. The bowl payout to each team cannot be correct as some conference operate with bowl revenue sharing procedures. Looking at the payouts like the Huffington post does will undoubtedly give you a higher gini coefficient and does not reflect the true distribution of revenues.

    Duke did not go to a bowl game last year, however they still received a share of bowl revenue from the ACC.