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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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 39318.

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Date of creation: Jan 2012
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Handle: RePEc:pra:mprapa:39318

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Keywords: Income inequality; Gini coefficients; partial correlation; rural Pakistan;

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  1. 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.
  2. 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.
  3. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
  4. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-25, April.
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