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The poverty and inequality nexus in Ghana: A decomposition analysis of household expenditure components

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  • Jacob Novignon
  • Justice Nonvignon
  • Richard Mussa

Abstract

Purpose - Understanding the linkages between poverty and inequality is vital to any sustainable development and poverty reduction strategies. In Ghana, while poverty has reduced significantly over the years, inequality has increased. The purpose of this paper is to examine the linkages between inequality in household expenditure components and overall inequality and poverty in Ghana. Design/methodology/approach - Using microdata from the sixth round of the Ghana Living Standards Survey (GLSS 6) conducted in 2012/2013, marginal effects and elasticities were computed for both within- and between-component analysis. Findings - The results suggest that, in general, reducing within-component inequality significantly reduces overall poverty and inequality in Ghana, compared with between-component inequality. Specifically, inequality in education and health expenditure components were the largest contributors to overall poverty and inequality. The findings imply that policies directed toward reducing within-component inequality will be more effective. Specifically, the findings of the study corroborate recent policies on education and health in Ghana aimed at inequality within these components. Sustaining and scaling up these policies will be a step in the right direction. Originality/value - The study contributes to existing studies in several ways: first, this study becomes the first attempt to examine inequality-poverty nexus using household expenditure components in Ghana. Second, the use of expenditure in place of income is an addition to the literature. Income is usually subject to reporting biases and is minimal in expenditure. Finally, the findings highlight the need for poverty reduction strategies to focus on specific household components including education and health. Blanket interventions may not be effective in reducing inequality and poverty.

Suggested Citation

  • Jacob Novignon & Justice Nonvignon & Richard Mussa, 2018. "The poverty and inequality nexus in Ghana: A decomposition analysis of household expenditure components," International Journal of Social Economics, Emerald Group Publishing, vol. 45(2), pages 246-258, February.
  • Handle: RePEc:eme:ijsepp:ijse-11-2016-0333
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    References listed on IDEAS

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    1. Dollar, David & Kraay, Aart, 2002. "Growth Is Good for the Poor," Journal of Economic Growth, Springer, vol. 7(3), pages 195-225, September.
    2. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
    3. M.O. Odedokun & Jeffery Round, 2004. "Determinants of Income Inequality and its Effects on Economic Growth: Evidence from African Countries," African Development Review, African Development Bank, vol. 16(2), pages 287-327.
    4. Abdelkrim Araar & Jean-Yves Duclos, 2010. "Poverty and Inequality: A Micro Framework," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 19(3), pages 357-398, June.
    5. Makdissi, Paul & Wodon, Quentin, 2002. "Consumption dominance curves: testing for the impact of indirect tax reforms on poverty," Economics Letters, Elsevier, vol. 75(2), pages 227-235, April.
    6. Augustin Kwasi Fosu, 2009. "Inequality and the Impact of Growth on Poverty: Comparative Evidence for Sub-Saharan Africa," Journal of Development Studies, Taylor & Francis Journals, vol. 45(5), pages 726-745.
    7. Richard Mussa, 2014. "Household Expenditure Components and the Poverty and Inequality Relationship in Malawi," African Development Review, African Development Bank, vol. 26(1), pages 138-147, March.
    8. Gajate-Garrido, Gissele & Owusua, Rebecca, 2013. "The national health insurance scheme in Ghana: Implementation challenges and proposed solutions:," IFPRI discussion papers 1309, International Food Policy Research Institute (IFPRI).
    9. B. Essama-Nssah & Peter J. Lambert, 2009. "Measuring Pro-Poorness: A Unifying Approach With New Results," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 752-778, September.
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    Cited by:

    1. Nunoo, Jacob & Nyanzu, Frederick, 2017. "Dietary pattern, socioeconomic status and child health outcomes in Ghana: application of multilevel analysis," MPRA Paper 80663, University Library of Munich, Germany.

    More about this item

    Keywords

    Ghana; Poverty; Inequality; Household expenditure; D630; I32; I38;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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