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Income inequality in rural Pakistan-sources and decompositions

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  • Shams, Khadija

Abstract

This paper analyses income inequalities in rural Pakistan. Using household survey data, we decompose income inequality according to its different sources. We calculate Gini coefficients and Theil indices both within and across provinces and districts. A partial correlation analysis extends our descriptive investigation to reveal the different impacts of the various income sources on overall income inequalities. The unique focus on rural areas and the more disaggregated (district level) approach permits more nuanced policy implications. We find that inequality between districts is higher than within districts. Non-farm and transfer income have the strongest impact on income inequality across districts both in economic and econometric terms. While the former source of income is inequality increasing, transfer income tends to reduce inequalities. Our results highlight in particular the need for factor mobility to facilitate transfer income.

Suggested Citation

  • Shams, Khadija, 2012. "Income inequality in rural Pakistan-sources and decompositions," MPRA Paper 39318, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:39318
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    References listed on IDEAS

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    1. Adams, Richard H, Jr & Alderman, Harold, 1992. "Sources of Income Inequality in Rural Pakistan: A Decomposition Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(4), pages 591-608, November.
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    4. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
    5. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-625, April.
    6. Glewwe, Paul, 1986. "The distribution of income in Sri Lanka in 1969-1970 and 1980-1981 : A decomposition analysis," Journal of Development Economics, Elsevier, vol. 24(2), pages 255-274, December.
    7. Mehboob Ahmad, 2000. "Estimation of Distribution of Income in Pakistan, Using Micro Data," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 39(4), pages 807-824.
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    More about this item

    Keywords

    Income inequality; Gini coefficients; partial correlation; rural Pakistan;
    All these keywords.

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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