Micro-determinants of income Inequality and consumption in rural Bangladesh

Abstract

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.