I= AN ANALYSIS OF INCOME AND CONSUMPTION INEQUALITIES IN PAKISTAN
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Title of Thesis
AN ANALYSIS OF INCOME AND CONSUMPTION INEQUALITIES IN PAKISTAN

Author(s)
Muhammad Idrees
Institute/University/Department Details
Department of Economics/ Quaid-i-Azam University, Islamabad
Session
2006
Subject
Economics
Number of Pages
276
Keywords (Extracted from title, table of contents and abstract of thesis)
income and consumption inequalities, generalized entropy indices, gini coefficient, generalized gini indices, atkinson's indices, ebertā€™s indices, earned incomes, non-earned incomes, inequality measure

Abstract
This thesis presents an overview of alternative approaches to measuring inequality and analyzes various dimensions of income and consumption inequality in Pakistan using alternative approaches. It is observed that generalized entropy indices, Gini coefficient, generalized Gini indices, Atkinson's indices and Ebertā€™s indices pass the tests of desirable properties of an ideal inequality measure. Among these the generalized entropy indices, Gini coefficient and Ebertā€™s indices are also decomposable. Some of the popular measures like the two Theil's measures, Gini coefficient and Atkinson's indices can be derived from these general measures either as special cases or as transformations of the special cases. The thesis employs all these measures for the empirical analysis. Inequality in income and consumption is analyzed using a) households income and household consumption; b) per adult-equivalent income and consumption; and c) earnings of individual earners. The entire analysis is based on micro level data taken from Household Integrated Economic Survey for the years 1992-93, 1996-97, 1998-99 and 2001-02.

The study shows that in general inequality in household income/consumption has been greater than the inequality in per adult-equivalent incomes/consumptions, indicating that ignoring household size tends to overestimates the extent of inequality. The level of consumption inequality is generally observed to be less than the level of income inequality. The analysis further reveals that income and consumption inequalities have been more severe in urban areas than in the rural areas. This difference can be explained by the prevalence of institutional wage rewards in rural areas whereby almost all members of labor force are employed but the wage rate is set around the subsistence level and high rents and transportations costs in urban areas. It is observed that the inter-regional inequality in income or consumption is mainly across the rural -urban divide rather than across the provincial divide. The analysis further shows that the rural -urban inequality is higher in the larger provinces as compared to the smaller ones.

Decomposition analysis of income shows that non-earned incomes are more unequally distributed than the earned incomes. The sources of income that have contributed significantly to inequality are self-employment other than agriculture, profits, interests, gifts/assistance and property in urban areas and self-employment in agriculture as well as other than agriculture and property income in the rural areas. The analysis further shows that inequality in non-food consumption expenditures is more severe as compared to the inequality in food consumption expenditures.

The thesis finds the presence of high degree of earnings inequality in Pakistan, especially in urban Pakistan. The analysis further shows that earnings inequality is relatively higher among youngest and eldest groups of earners, female earners, earners with low level of education, earners working as employers and members of producer's cooperatives, and the earners employed in services industries other than social & personal services. On the other hand, the degree of inequality is lower among the middle-age groups, the highly educated workers, paid workers and the workers employed in the primary products industries namely agriculture, forestry, hunting & fishing.

The decomposition analysis indicates that age of the earners in an important factor contributing to earning inequality in urban Pakistan but not in rural Pakistan. In urban Pakistan the earnings inequality between employment statuses, especially between employers and paid employees, is also quite high. Contrary to the popular belief, the inequality between earners with different levels of education is not much high, though the inequality within the groups of earners having higher levels of education is less than the inequality within the groups of earners with low levels of education.

Download Full Thesis
11227.75 KB
S. No. Chapter Title of the Chapters Page Size (KB)
1 0 Contents
405.69 KB
2 1 Introduction 1
452.35 KB
  1.1 Introduction 1
  1.2 Objectives 7
  1.3 Plan Of The Study 11
3 2 Measures Of Inequality 14
1639.22 KB
  2.1 Introduction 14
  2.2 Classification Of Inequality Measures 15
  2.3 Decomposition Of Inequality Measures 46
  2.4 Desirable Properties Of An Inequality Measure 60
  2.5 Summary 69
  2.6 Appendix 70
4 3 Review Of Empirical Work On Inequality In Pakistan 74
524.53 KB
  3.1 Introduction 74
  3.2 Measurement And Trends In Inequality In Pakistan 75
  3.3 Decomposition Of Inequality In Pakistan 83
  3.4 Concluding Remarks 87
5 4 Analytical Framework 89
655.96 KB
  4.1 Introduction 89
  4.2 Conceptual Issues In The Measurement Of Inequality 91
  4.3 Dimensions Of Inequality 95
  4.4 Measures Of Inequality And Decomposition 108
6 5 The Data And Variables 114
496.41 KB
  5.1 Introduction 114
  5.2 Data Source 114
  5.3 Sampling Procedure 115
  5.4 Concepts And Definitions 118
  5.5 Estimation Procedure 120
  5.6 Preliminary Statistics 121
7 6 Time Trend Analysis Of Income And Consumption Inequalities 128
1571.92 KB
  6.1 Introduction 128
  6.2 Income And Consumption Inequalities In Pakistan 129
  6.3 Income And Consumption Inequalities In Provinces 138
  6.4 Summary 157
8 7 Region Wise Decomposition Of Income And Consumption Inequalities 159
1408.91 KB
  7.1 Introduction 159
  7.2 Decomposition Of Pakistan 's Income And Consumption Inequalities By Rural-Urban Areas 161
  7.3 Province Wise Decomposition Of Pakistan 's Income And Consumption Inequalities 168
  7.4 Rural-Urban Wise Decomposition Of Income And Consumption Inequalities In Each Province 173
  7.5 Summary 182
9 8 Allocation Wise Analysis Of Income And Consumption Inequality 184
791.95 KB
  8.1 Introduction 184
  8.2 Decomposition Of Income Inequality Into Income Components And Income Sources 184
  8.3 Decomposition Of Consumption Inequality Into Consumption Components 192
10 9 Household Size, Number Of Earners And Income Inequalities 203
933.34 KB
  9.1 Introduction 203
  9.2 Decomposition Of Income Inequality By Household Size 203
  9.3 Decomposition Of Income Inequality By Number To Earner's 207
  9.4 Decomposition Of Income Inequality By Dependency Ratio 211
  9.5 Summary 215
11 10 Analysis Of Earning Inequalities 216
2369.08 KB
  10.1 Introduction 216
  10.2 Earnings Inequality In Pakistan 217
  10.3 Decomposition Of Earning Inequality By Rural-Urban Areas 219
  10.4 Decomposition Of Earning Inequality By Age Of Earner 221
  10.5 Decomposition Of Earning Inequality By Gender Of Earner 227
  10.6 Decomposition Of Earning Inequality By Education Of Earner 231
  10.7 Decomposition Of Earning Inequality By Employment Status Of Earner 238
  10.8 Decomposition Of Earning Inequality By Major Industry Of Earner 242
  10.9 Summary 248
12 11 Summary And Conclusions 251
298.35 KB
  11.1 References