Urban Economic Inequality and Its Determinants in the Southern Ethiopia: An Empirical Analysis

Abstract

Income distribution among the economy participants in the urban settings has becoming the top agenda of research and development concerns in a contemporary world. The present study attempts to examine the status of urban economic inequality and its determinants in the Southern Ethiopia. A pre-tested structured questionnaire was used to collect the primary data from 508 households selected following multistage random sampling techniques. To analyze the status of urban economic inequality proxied by the share of annual consumption expenditure and total assets value, the study used Lorenz curve and Gini coefficients while econometric models approach was employed to explore its determinants. The study results revealed highly skewed distribution of economic wellbeing among the sampled households as evidenced by high Gini coefficients in its dimensions. Precisely, relative to other urbans, the wealth inequality was the highest in Wolaita Sodo town with Gini index of 0.4974 followed by Hawassa, while the highest consumption inequality (0.5082) measured by the same index was recorded in Hawassa city administration. The results of GLM and quantile regressions show that age of the household head, employment in casual works and town-dummy have statistically significant negative effect on per adult annual consumption expenditure, whereas the education level of household head, self-employment, asset ownership, income diversification, access to credit, private and saving habit are important variables that positively and significantly influence the household consumption expenditure; hence, make differences in the living standards among households. Furthermore, the positive and significant effect of gender of the household head, employment public sector and NGO, and cooperative membership was noticed in the 90^th quantile regression result. Therefore, considering these significant variables during policy interventions is worthwhile. Above all, the use of appropriate redistributive policies can play a pivotal role in mitigating the unequal distribution of economic welfare among participants so as to augment the poverty reduction efforts.

Keywords: Urban Economic Inequality, Lorenz curve, Gini-coefficients, Quantile regression Southern Ethiopia