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Micro-determinants of Income Inequality and Consumption in Rural Bangladesh

Sanzidur Rahman
Associate Professor (Reader)
Rural Development, School of Geography, Earth and Enviro Environmental Sciences, University of Plymouth, UK.

Abstract/ Executive Summary:

The paper examines the extent to which household and regional characteristics influence income inequality and consumption/welfare based on an in-depth survey of 406 households from 21 villages in three regions of Bangladesh. Results show that the overall Gini coefficient for rural incomes is 0.43 but Gini-decomposition revealed that the contribution of mixed crop production to inequality is just 10 percent while “Green Revolution” technology contributes almost 29 percent. Land ownership, farm capital assets, modern irrigation, non-agricultural income, and household head’s education significantly increase consumption. Tenants and households with more dependents are doubly disadvantaged and consume significantly less. Regional factors also significantly influence inequality and consumption. Consumption is significantly higher in regions with developed infrastructure. Comilla is the region with the highest level of inequality and a significantly lower level of consumption. Thus, an integrated policy of investments in modern irrigation, crop diversification, tenancy reform, mass education and rural infrastructure is necessary to increase consumption/welfare and reduce income inequality in Bangladesh.

Keywords: Income inequality, Gini-decomposition analysis, Consumption or welfare determinants, Bangladesh

Location: Jamalpur, Jessore and Comilla districts, Bangladesh

Start Date: 00-02-1997

End Date: 00-04-1997

Program Area: Socio-economic and Policy

Non-commodity: Income generation

Objectives:

The paper examined the extent to which household and regional characteristics influence income inequality and consumption/welfare based on an in-depth survey of 406 households of Bangladesh.

Methodology:

Primary data for the study came from an intensive farm-survey conducted from February to April, 1997, in three agro-ecological regions of Bangladesh. Twenty-one villages were included, eight from the Central sub-district of Jamalpur representing wet agro-ecology areas, six from the Manirampur sub-district of Jessore representing dry agro-ecology areas, and seven from the Matlab sub-district of Comilla, representing wet agro-ecology and agriculturally developed areas. A total of 406 farm households (175 in Jamalpur, 105 in Jessore and 126 in Comilla) were selected from these villages using a multistage stratified random sampling procedure. To identify the sources of income inequality and consumption determinants, a number of variables were constructed, grouped as follows: sources of income to the household; production inputs; household characteristics; and two indices, one to capture soil quality and the other the degree of local infrastructure development. Regional dummies are also included. Two land variables were used in the analysis. The amount of land (in hectares) owned per capita is an indication of the wealth of the family, while the area of land under cultivation or farm operation size per household is a direct production input which is made up of owned, rented-in and/or mortgaged-in land. In addition, the value of farm capital assets is included which also serves as production input because it includes the value of livestock resources owned, which is a major source of draft power in farming. Use of land as a determinant is abundant in the literature. Use of farm capital asset is, however, less common in the literature. Both of these variables are assumed to positively influence consumption/welfare. Two indices to capture the influence of spatial factors were included in the analysis. These are: soil fertility and state of infrastructure. The soil fertility index is constructed from test results of soil samples collected from representative locations during a field survey for crop year 1996. Ten soil-fertility parameters were tested, namely soil pH, nitrogen, potassium, phosphorus, sulfur, zinc, texture, exchange capacity, content of organic matter and electrical conductivity. Each of these positive characteristics was assigned 1 point and thus a high index value implies better soil fertility. 1. The infrastructure index was constructed using the cost of access approach. Here thirteen elements are included, namely primary markets, secondary markets, storage facilities, rice mills, paved roads, bus stops, banks, union offices, agricultural extension offices, high schools, colleges, sub-district headquarters and post offices. A high index value implies poorly developed infrastructure. 2. Use of these two indices, although deemed quite important, is not usually reported in the literature with a few exceptions). It assume soil fertility status and developed infrastructure to have consumption/welfare enhancing effects.

Source of Information: Journal of Poverty Alleviation and International Development, 6(2), 2015

Article Link (Online Journal): http://jpaid.yonsei.ac.kr/contents/bbspage/xbd/board.php?bo_table=m5_db1

Funding Source:

Budget:

Total Budget (Tk.) :

Achievement/Findings:

An integrated policy of decentralized crop diversification, incorporating the balanced adoption of modern agricultural technology (e.g., one main season in a crop year cycle), mass adult literacy promotion, tenancy reform to enable land rental market to operate effectively, and rural infrastructure development to promote economic diversification and non-agricultural income, is recommended in programs designed to reduce income inequality and increase consumption/welfare of rural households in Bangladesh.

Knowledge Management: Journal