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Inequality Trends and Determinants in Sri Lanka 1980-2002: A Shapley Approach to Decomposition

Author

Listed:
  • Ramani Gunatilaka
  • Duangkamon Chotikapanich

Abstract

Sri Lanka liberalised its economy in 1977, paving the way for more rapid economic growth and higher rates of job creation. But tensions over distributional issues still plague the body politic. This paper investigates the evolution of Sri Lanka's income distribution in the period 1980-2002 and uses the Shapley value decomposition methodology to determine underlying causes. The study finds that while average incomes rose across strata, the rich experienced more rapid income growth leading to greater inequality. Inequality change was driven by differential access to infrastructure, education, and occupation status. Demographic factors including ethnicity, and spatial factors, contributed very little. The study recommends policies that ensure more equitable access to income earning assets such as education and infrastructure services and make sure that increases in inequality do not take place along sectoral, regional and ethnic fault lines.

Suggested Citation

  • Ramani Gunatilaka & Duangkamon Chotikapanich, 2006. "Inequality Trends and Determinants in Sri Lanka 1980-2002: A Shapley Approach to Decomposition," Monash Econometrics and Business Statistics Working Papers 6/06, Monash University, Department of Econometrics and Business Statistics.
    • Handle: RePEc:msh:ebswps:2006-6
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    File URL: http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2006/wp6-06.pdf
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    References listed on IDEAS

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    2. John Creedy & Nicolas Hérault†, 2011. "Decomposing Inequality and Social Welfare Changes : The Use of Alternative Welfare Metrics," Department of Economics - Working Papers Series 1121, The University of Melbourne.
    3. Sebastian Leitner & Robert Stehrer, 2009. "Determinants of Inequality in Selected SEE Countries: Results from Shapley Value Decompositions," wiiw Balkan Observatory Working Papers 84, The Vienna Institute for International Economic Studies, wiiw.

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    More about this item

    Keywords

    income inequality; Sri Lanka; Shapley value decomposition;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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