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The shape of income distribution and decomposition of the changes in income inequality in India

Author

Listed:
  • Aswini Kumar Mishra
  • Anil Kumar
  • Abhishek Sinha

Abstract

Purpose - Though Indian economy since 1980s has expanded very rapidly, yet the benefits of growth remain very unequally distributed. The purpose of this paper is to provide new evidence about the shape, intensity and decomposition of inequality change between 2005 and 2012. The authors find that Gini, as a measure of income inequality, has increased irrespective of geographic regions. Design/methodology/approach - Based on a recent distribution analysis tool, “ABG,” the paper focuses on local inequality, and summarizes the shape of inequality in terms of three inequality parameters (α,βandγ) to examine how the income distributions have changed over time. Here, the central coefficient (α) measures inequality at the median level, with adjustment parameters at the top (β) and bottom (γ). Findings - The results reveal that at the middle of distribution (α), there is almost the same inequality in both the periods, but the coefficients on the curvature parametersβandγshow that there is increasing inequality in the subsequent period. Finally, an analysis of decomposition of inequality change suggests that though income growth was progressive, however, this equalizing effect was more than offset by the disequalizing effect of income reranking. Research limitations/implications - This paper shows how it can be possible both for “the poor” to fare badly relatively to “the rich” and for income growth to be pro-poor. Practical implications - This paper stresses the significance of inequality reduction. Social implications - Inequality reduction is very much imperative in ending poverty and boosting shared prosperity. Originality/value - Perhaps, this research work is first of its kind to examine the shape and decomposition of change in income inequality in India in recent years.

Suggested Citation

  • Aswini Kumar Mishra & Anil Kumar & Abhishek Sinha, 2019. "The shape of income distribution and decomposition of the changes in income inequality in India," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 46(3), pages 760-776, August.
  • Handle: RePEc:eme:jespps:jes-09-2017-0253
    DOI: 10.1108/JES-09-2017-0253
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    Citations

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    Cited by:

    1. Aswini Kumar Mishra & Vedant Bhardwaj, 2022. "The Determinants of Access to Informal Credits in India: An Application of Quantiles via Moments Method," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 20(1), pages 1-22, March.
    2. Mishra, Aswini Kumar & Gupta, Akul & Bhardwaj, Vedant, 2022. "Permanent inequality versus earnings instability and transmission of income shocks to consumption expenditure in India," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 80-91.

    More about this item

    Keywords

    India; Distribution; Income; Inequality; Gini coefficient; Income distribution; Isograph; Pro-poor growth; C16; C46; C31; D31; O15; P46;
    All these keywords.

    JEL classification:

    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P46 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty

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