IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/72117.html
   My bibliography  Save this paper

Source of Inequality in consumption Expenditure in India: A Regression Based Inequality Decomposition Analysis

Author

Listed:
  • Tripathi, Sabyasachi

Abstract

Higher economic growth in India has bypassed a major percentage of population, whose share in income and benefits has been low. In recent years, the Central Government has been laying more emphasis on redistributive policies (such as, ‘inclusive growth’ strategy) in addition to keeping high the growth momentum. However, along with higher economic growth India has also been experiencing the higher level of inequality over the years. Due to lack of officially provided income data, a considerable number of studies have used consumption data to measure the level of inequality in India. However, much less is known about the driving force behind the trend of the increasing inequality and their quantitative contribution. In this back drop, the present paper estimates the Regression based inequality decomposition (Morduch and Sicular, 2002; Fields, 2003; Fiorio and Jenkins,2007) by considering unit level National Sample Survey data on consumption expenditure for the years 2004-05 and 2011-12 for rural and urban India separately. The main objective behind this exercise is to investigate the relevant household level characteristics which stand as the major source of consumption inequality in India. Regression results show that the estimated regression coefficients match with the expected signs, and most of them are statistically significant at 1 percent level. The decomposition based regression analysis finds that household size is responsible for the maximum share of inequality in the total inequality of the average MPCE and predicted MPCE in the both urban and rural areas in 2004-05 and 2011-12. In addition, factors like higher level of education, share of workers engaged in less productive jobs (such as, casual labour and agricultural worker), regular salary earning member of a household, higher level of land possessed by the households, and households having hired dwelling unit are also contributing to the higher level of inequality in the total inequality of the average MPCE and predicted MPCE. Finally, the paper suggests that in order to avoid the negative consequences of rising inequality in India, government must ensure higher level of education, higher level of employment opportunities, equal land distribution, and housing for all for any meaningful reduction of the level of inequality and for an equal and brighter India tomorrow.

Suggested Citation

  • Tripathi, Sabyasachi, 2016. "Source of Inequality in consumption Expenditure in India: A Regression Based Inequality Decomposition Analysis," MPRA Paper 72117, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:72117
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/72117/1/MPRA_paper_72117.PDF
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Institute for Human Development, 2015. "India Labour and Employment Report 2014," Working Papers id:7184, eSocialSciences.
    2. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    3. Hirschman, Albert O., 1973. "The changing tolerance for income inequality in the course of economic development," World Development, Elsevier, vol. 1(12), pages 29-36, December.
    4. repec:bla:revinw:v:47:y:2001:i:2:p:139-63 is not listed on IDEAS
    5. Guanghua Wan & Zhangyue Zhou, 2005. "Income Inequality in Rural China: Regression‐based Decomposition Using Household Data," Review of Development Economics, Wiley Blackwell, vol. 9(1), pages 107-120, February.
    6. Debraj Ray, 2010. "Uneven Growth: A Framework for Research in Development Economics," Journal of Economic Perspectives, American Economic Association, vol. 24(3), pages 45-60, Summer.
    7. Koulovatianos, Christos & Schroder, Carsten & Schmidt, Ulrich, 2005. "On the income dependence of equivalence scales," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 967-996, June.
    8. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
    9. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
    10. Jha, Raghbendra, 2000. "Reducing Poverty and Inequality in India Has Liberalization Helped?," WIDER Working Papers 295536, United Nations University, World Institute for Development Economic Research (UNU-WIDER).
    11. Lerman, Robert I & Yitzhaki, Shlomo, 1985. "Income Inequality Effects by Income," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 151-156, February.
    12. Azam, Mehtabul & Bhatt, Vipul, 2016. "Spatial Income Inequality in India, 1993-2011: A District Level Decomposition," IZA Discussion Papers 9892, Institute of Labor Economics (IZA).
    13. Xiaobo Zhang & Kevin Zhang, 2003. "How Does Globalisation Affect Regional Inequality within A Developing Country? Evidence from China," Journal of Development Studies, Taylor & Francis Journals, vol. 39(4), pages 47-67.
    14. Cain, J. Salcedo & Hasan, Rana & Magsombol, Rhoda & Tandon, Ajay, 2010. "Accounting for Inequality in India: Evidence from Household Expenditures," World Development, Elsevier, vol. 38(3), pages 282-297, March.
    15. Jonathan Morduch & Terry Sicular, 2002. "Rethinking Inequality Decomposition, With Evidence from Rural China," Economic Journal, Royal Economic Society, vol. 112(476), pages 93-106, January.
    16. Guanghua Wan, 2002. "Regression-based Inequality Decomposition: Pitfalls and a Solution Procedure," WIDER Working Paper Series DP2002-101, World Institute for Development Economic Research (UNU-WIDER).
    17. Tripathi, Sabyasachi, 2012. "Does higher economic growth reduce poverty and increase inequality: Evidence from urban India," Working Papers 289, Institute for Social and Economic Change, Bangalore.
    18. (No last name available), Himanshu, 2013. "Poverty and Food Security in India," ADB Economics Working Paper Series 369, Asian Development Bank.
    19. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    20. repec:bla:revinw:v:46:y:2000:i:2:p:139-59 is not listed on IDEAS
    21. Angus Deaton & Valerie Kozel, 2005. "Data and Dogma: The Great Indian Poverty Debate," The World Bank Research Observer, World Bank, vol. 20(2), pages 177-199.
    22. repec:ind:iegddp:70 is not listed on IDEAS
    23. Carlo Fiorio & Stephen Jenkins, 2007. "Regression-based inequality decomposition," United Kingdom Stata Users' Group Meetings 2007 03, Stata Users Group.
    24. Parthapratim Pal & Jayati Ghosh, 2007. "Inequality in India: A survey of recent trends," Working Papers 45, United Nations, Department of Economics and Social Affairs.
    25. Albert O. Hirschman & Michael Rothschild, 1973. "The Changing Tolerance for Income Inequality in the Course of Economic DevelopmentWith A Mathematical Appendix," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(4), pages 544-566.
    26. Koulovatianos, Christos & Schröder, Carsten & Schmidt, Ulrich, 2006. "Family-type subsistence incomes," Discussion Papers 2006/5, Free University Berlin, School of Business & Economics.
    27. Maurizio Bigotta & Jaya Krishnakumar & Uma Rani, 2015. "Further results on the regression-based approach to inequality decomposition with evidence from India," Empirical Economics, Springer, vol. 48(3), pages 1233-1266, May.
    28. Donaldson, David & Pendakur, Krishna, 2006. "The Identification of Fixed Costs From Consumer Behavior," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 255-265, July.
    29. Wan, Guanghua, 2004. "Accounting for income inequality in rural China: a regression-based approach," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 348-363, June.
    30. Raghuram G. Rajan, 2010. "Fault Lines: How Hidden Fractures Still Threaten the World Economy," Economics Books, Princeton University Press, edition 1, number 9111.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mohsen Ayyash & Siok Kun Sek, 2020. "Decomposing Inequality in Household Consumption Expenditure in Malaysia," Economies, MDPI, vol. 8(4), pages 1-15, October.
    2. Sabyasachi Tripathi & Komali Yenneti, 2024. "Does inequality in urban population distribution lead to income inequality? Evidence from India," Asia-Pacific Journal of Regional Science, Springer, vol. 8(3), pages 787-818, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Utpal Kumar De & Loitongbam Hena Devi, 2023. "Inequality Dynamics in Urban Manipur, India: A Decomposition Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 167(1), pages 67-89, June.
    2. Lwin Lwin Aung & Peter Warr, 2021. "Decomposing changes in inequality: Evidence from Myanmar," Review of Development Economics, Wiley Blackwell, vol. 25(3), pages 1172-1196, August.
    3. Guanghua Wan & Zhangyue Zhou, 2005. "Income Inequality in Rural China: Regression‐based Decomposition Using Household Data," Review of Development Economics, Wiley Blackwell, vol. 9(1), pages 107-120, February.
    4. Carlos Gradín, 2018. "Explaining cross-state earnings inequality differentials in India: An RIF decomposition approach," WIDER Working Paper Series 024, World Institute for Development Economic Research (UNU-WIDER).
    5. Hanewald, Katja & Jia, Ruo & Liu, Zining, 2021. "Why is inequality higher among the old? Evidence from China," China Economic Review, Elsevier, vol. 66(C).
    6. Vladimir Hlasny, 2017. "Different Faces of Inequality across Asia: Decomposition of Income Gaps across Demographic Groups," LIS Working papers 691, LIS Cross-National Data Center in Luxembourg.
    7. Carlos Gradín, 2018. "Explaining cross-state earnings inequality differentials in India: An RIF decomposition approach," WIDER Working Paper Series wp-2018-24, World Institute for Development Economic Research (UNU-WIDER).
    8. Hoang Van Long, 2013. "Unequal Regional Development in Rural Vietnam: Sources of Spatial Disparities and Policy Considerations," Journal of Economics and Behavioral Studies, AMH International, vol. 5(6), pages 325-335.
    9. Francesco Devicienti, 2010. "Shapley-value decompositions of changes in wage distributions: a note," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 8(1), pages 35-45, March.
    10. Cathal O’Donoghue & Jason Loughrey & Denisa M. Sologon, 2018. "Decomposing the Drivers of Changes in Inequality During the Great Recession in Ireland using the Fields Approach," The Economic and Social Review, Economic and Social Studies, vol. 49(2), pages 173-200.
    11. Amirah El-Haddad & May Gadallah, 2018. "The Informalization of the Egyptian Economy (1998-2012): A Factor in Growing Wage Inequality?," Working Papers 1210, Economic Research Forum, revised 12 Jun 2018.
    12. Mohsen Ayyash & Siok Kun Sek, 2020. "Decomposing Inequality in Household Consumption Expenditure in Malaysia," Economies, MDPI, vol. 8(4), pages 1-15, October.
    13. SOLOGON Denisa & ALMEIDA Vanda & VAN KERM Philippe, 2019. "Accounting for the distributional effects of the 2007-2008 crisis and the Economic Adjustment Program in Portugal," LISER Working Paper Series 2019-05, Luxembourg Institute of Socio-Economic Research (LISER).
    14. Philipp Ehrl, 2014. "A breakdown of residual wage inequality in Germany," Working Papers 150, Bavarian Graduate Program in Economics (BGPE).
    15. Uma Rani & Jaya Krishnakumar & Maurizio Bigotta, 2017. "Accounting for income inequality: empirical evidence from India," Indian Economic Review, Springer, vol. 52(1), pages 193-229, December.
    16. Jabłoński Łukasz, 2019. "Inequality in Economics: The Concept, Perception, Types, and Driving Forces," Journal of Management and Business Administration. Central Europe, Sciendo, vol. 27(1), pages 17-43, March.
    17. Feng Dong & Bolin Yu & Jixiong Zhang, 2018. "What Contributes to Regional Disparities of Energy Consumption in China? Evidence from Quantile Regression-Shapley Decomposition Approach," Sustainability, MDPI, vol. 10(6), pages 1-26, May.
    18. Zhong, Hai, 2011. "The impact of population aging on income inequality in developing countries: Evidence from rural China," China Economic Review, Elsevier, vol. 22(1), pages 98-107, March.
    19. Tomoki Fujii, 2018. "Has the development gap between the ethnic minority and majority groups narrowed in Vietnam?: Evidence from household surveys," The World Economy, Wiley Blackwell, vol. 41(8), pages 2067-2101, August.
    20. Sebastian Leitner, 2015. "Drivers of wealth inequality in euro area countries," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 137, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.

    More about this item

    Keywords

    Consumption Expenditure; Inequality; Regression Based Inequality; India;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:72117. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.