Explaining Changes in Inequality: Myanmar, 2005 to 2010

We study the determinants of changes in the distribution of household expenditures in Myanmar, using a large, nationwide panel household survey data set covering 2005 and 2010. These data, compiled by the United Nations Development Program and the Myanmar government, constitute the only panel household survey data currently available for Myanmar. They show that although there was no statistically significant change in mean real consumption expenditures between these years, the distribution of that consumption across households became significantly less unequal. The sources of this large decline in measured inequality have not been systematically investigated. The paper attempts that, using the above panel data set and applying the regression-based inequality decomposition developed by Fields and its subsequent extension by Yun. The results indicate that region-specific variables, occupational changes and changes in education were the main contributors to the narrowing of expenditure inequality, but that road development expenditures had the opposite effect. On the methodology of decomposition, we argue first that the Yun extension of Fields’ approach promises enhanced policy relevance, by distinguishing between changes in household characteristics and changes in their impact on expenditures, as reflected in the estimated regression coefficients. Second, we show that the decomposition described by Yun entails arbitrary sequencing of the distributions being compared, influencing the decomposition obtained. We explain the underlying reason for this problem and illustrate a simple solution.