Decomposition Analysis of Inequalities in Household Consumption Expenditure in Nigeria.
Abstract
Income inequality is one of the major underdevelopment problems facing developing countries including Nigeria.
Despite serious attention given to inequality in both theoretical and empirical literature, it is still understudied in the case of Nigeria because most empirical studies overaggregate analysis.
This study departs from existing studies in two ways. First, the study disaggregates household consumption expenditure into food and nonfood and thus decomposes inequality into within-groups and between-groups components using generalised Entropy (GE) measures.
The purpose is to ascertain where inequality in household consumption expenditure is coming from.
Second, the study employs regression-based inequality decomposition to ascertain the determinants of inequality in food and nonfood expenditure using household demographic and socioeconomic characteristics as covariates.
The data used in the analyses is the 2010 Harmonised Household Living Standards Survey for Nigeria.
The results show that nonfood expenditure is the major source of inequality in household consumption expenditure in both urban and rural areas with inequality coefficients of above 0.6 compared to about 0.4 for food expenditure.
The decompositions also show that within-group inequalities for nonfood and food expenditure are respectively 0.97 and 0.365 using the Theil index, while between-group inequalities for nonfood and food are respectively 0.016 and 0.035.
Table Of Contents
Title Page i
Certification ii
Approval Page iii
Dedication iv
Acknowledgements v
Table of Contents vi
List of Figures viii
List of Tables ix
Abstract x
CHAPTER ONE: INTRODUCTION
- Background of the Study 1
- Statement of the Problem 3
- Research Questions 5
- Objectives of the Study 5
- Research Hypothesis 6
- Significance of the Study 6
- Scope of the Study 7
CHAPTER TWO: LITERATURE REVIEW
- Conceptual Framework 8
- Theoretical Literature 10
- Introduction 10
- Social Segregation Theory 10
- Political Theory 11
- Globalization Theory 11
- Human Capital Theory 12
- Empirical Literature 13
- Studies from other Countries 13
- Studies on Nigeria 26
- Limitations of Previous Studies and Motivations 36
CHAPTER THREE: THEORETICAL FRAMEWORK AND METHODOLOGY
- Theoretical Framework 38
- Model Specification 40
- Nonparametric Specifications 40
- Decomposition of Income Inequality: Regression Based Inequality 41
- Justification of the Approach 44
- Identifying the Unit of Analysis 45
- Determining the Measure of Welfare 45
- Data Description 45
CHAPTER FOUR: PRESENTATION AND INTERPRETATION OF MODEL RESULT
- Non parametric Result 47
- Determinants of Inequality of food and Nonfood Expenditure 51
CHAPTER FIVE: SUMMARY OF FINDINGS, POLICY RECOMMENDATIONS AND CONCLUSIONS
- Summary of Findings 55
- Policy Recommendations 56
- Conclusion 57
References 58
Appendix 67
Introduction
Background of Study
Household consumption expenditure is one of the important components of gross domestic product (GDP). On the average, consumption expenditure accounts for over 60 percent of the gross domestic product in all countries.
When developing countries are singled out, consumption expenditure could account for as high as 68 perccent to 70 percent of the GDP (Yakubu and Abbas, 2012).
Consumption expenditure is defined as the market prices of all goods and services purchased by households to satisfy their needs and wants. It includes all foodand non-food expenditure.
For a typical developing country such as Nigeria, households spend more than 60 percent on food items and about 40 percent on non-food items (which include education expenditure and medical expenditure) (Yakubu and Abbas, 2012).
Research by International Fund for Agricultural Development (IFAD) showed that inequality in household consumption expenditure is widespread and rising in both urban and rural areas in Nigeria(IFAD, 2007).
Similarly, a report published by the National Bureau of Statistics (NBS) in 2012, revealed that inequality in household consumption expenditure varies greatly in the six geo-political zones of Nigeria.
References
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