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Food Price Heterogeneity and Income Inequality in Malawi: Is Inequality Underestimated?

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  • Mussa, Richard

Abstract

The paper uses data from the Second and the Third Integrated Household Surveys to examine whether the poor pay more for food in Malawi, and the consequences of the poverty penalty on inequality measurement. The results show that regardless of location and year, poor households pay more for food compared to nonpoor households. It is found that measured inequality based on a new consumption aggregate is much higher than official inequality figures. The paper also finds that nominal inequality underestimates "real" inequality, with the underestimation ranging from 3.9% to 7.1% for the Gini coefficient, 8.4% to 16.2% for the Thiel L, and 0.11% to 24.5% for the Thiel T. The paper therefore finds that official inequality figures understate the inequality problem in Malawi. The high inequality levels may partly explain the puzzle of high economic growth which has led to marginal poverty reduction in Malawi as these high levels of inequality could be impeding the poverty reducing effect of economic growth.

Suggested Citation

  • Mussa, Richard, 2014. "Food Price Heterogeneity and Income Inequality in Malawi: Is Inequality Underestimated?," MPRA Paper 56080, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:56080
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    References listed on IDEAS

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    1. Eddy van Doorslaer & Xander Koolman, 2004. "Explaining the differences in income‐related health inequalities across European countries," Health Economics, John Wiley & Sons, Ltd., vol. 13(7), pages 609-628, July.
    2. repec:bla:revinw:v:46:y:2000:i:2:p:201-11 is not listed on IDEAS
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    7. Christophe Muller, 2008. "The Measurement Of Poverty With Geographical And Intertemporal Price Dispersion: Evidence From Rwanda," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 54(1), pages 27-49, March.
    8. Muller, Christophe, 2002. "Prices and living standards: evidence for Rwanda," Journal of Development Economics, Elsevier, vol. 68(1), pages 187-203, June.
    9. Wagstaff, Adam & van Doorslaer, Eddy & Watanabe, Naoko, 2003. "On decomposing the causes of health sector inequalities with an application to malnutrition inequalities in Vietnam," Journal of Econometrics, Elsevier, vol. 112(1), pages 207-223, January.
    10. Gibson, John & Kim, Bonggeun, 2013. "Do the urban poor face higher food prices? Evidence from Vietnam," Food Policy, Elsevier, vol. 41(C), pages 193-203.
    11. World Bank, 2013. "Malawi Public Expenditure Review," World Bank Publications - Reports 20586, The World Bank Group.
    12. repec:dau:papers:123456789/4381 is not listed on IDEAS
    13. Ronald U. Mendoza, 2011. "Why do the poor pay more? Exploring the poverty penalty concept," Journal of International Development, John Wiley & Sons, Ltd., vol. 23(1), pages 1-28, January.
    14. Vijayendra Rao, 2000. "Price Heterogeneity And “Real” Inequality: A Case Study Of Prices And Poverty In Rural South India," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(2), pages 201-211, June.
    15. Timothy K.M. Beatty, 2010. "Do the Poor Pay More for Food?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 608-621.
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    17. Jean-Yves Duclos & Abdelkrim Araar, 2006. "Poverty and Equity," Economic Studies in Inequality, Social Exclusion, and Well-Being, Springer, number 978-0-387-33318-2, November.
    18. World Bank, 2007. "Malawi Poverty and Vulnerability Assessment : Investing in Our Future, Synthesis Report," World Bank Publications - Reports 7557, The World Bank Group.
    19. Owen O'Donnell & Eddy van Doorslaer & Ravi P. Rannan-Eliya & Aparnaa Somanathan & Shiva Raj Adhikari & Deni Harbianto & Charu C. Garg & Piya Hanvoravongchai & Mohammed N. Huq & Anup Karan & Gabriel M., 2007. "The Incidence of Public Spending on Healthcare: Comparative Evidence from Asia," The World Bank Economic Review, World Bank, vol. 21(1), pages 93-123.
    20. Dorward, Andrew & Chirwa, Ephraim & Kelly, Valerie A. & Jayne, Thomas S. & Slater, Rachel & Boughton, Duncan, 2008. "Evaluation Of The 2006/7 Agricultural Input Subsidy Programme, Malawi. Final Report," Food Security Collaborative Working Papers 97143, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    21. Xander Koolman & Eddy van Doorslaer, 2004. "On the interpretation of a concentration index of inequality," Health Economics, John Wiley & Sons, Ltd., vol. 13(7), pages 649-656, July.
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    Cited by:

    1. UNDP Regional Bureau for Africa & Bruno Martorano & Giovanni Andrea Cornia, "undated". "Building an Integrated Inequality Dataset and the Seven Sins of Inequality Measurement in sub-Saharan Africa," UNDP Africa Policy Notes 2017-16, United Nations Development Programme, Regional Bureau for Africa.
    2. Mussa, Richard, 2017. "Poverty and Inequality in Malawi: Trends, Prospects, and Policy Simulations," MPRA Paper 75979, University Library of Munich, Germany.
    3. repec:rac:ecchap:2017-16 is not listed on IDEAS
    4. Cornia, Giovanni Andrea & Martorano, Bruno, 2017. "Income Inequality Trends in sub-Saharan Africa: Divergence, determinants and consequences: Building an Integrated Inequality Dataset and the ‘Seven Sins’ of Inequality Measurement in Sub-Saharan Afric," UNDP Africa Reports 267776, United Nations Development Programme (UNDP).

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    More about this item

    Keywords

    poverty penalty; inequality; Malawi;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D30 - Microeconomics - - Distribution - - - General

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