Decomposition analysis of the Gini coefficient of consumer expenditures in Botswana

Abstract

ABSTRACT Using the 2009/10 Botswana Core Welfare Indicator Survey (BCWIS) and 2015/16 Botswana Multi-Topic Household Survey (BMTHS) datasets, this article discusses inequality in food and non-food expenses in Botswana using the Lerman & Yitzhaki [1984. A note in the calculation and interpretation of the Gini Index. Economics Letters 15, 363–8] inequality decomposition method. The main aim is to investigate how aggregate consumption inequality translates into inequality within each spending component, in order to better understand the distribution of resources held, as well as the population's living standards, and to make recommendations on redistributive government policies. The means, standard errors, and confidence intervals for the component Gini coefficients estimates are also calculated using a simple bootstrap method. The average Gini coefficient of consumption expenditure within the groups increased from 0.498 to 0.533 between 2009/10 and 2015/16, according to the findings. This increase in total expenditure inequality may be due to the increased burden of non-food spending in the household budget, which is more unequal than food spending. Food and clothes & footwear have lower Gini coefficients than other goods since they are considered necessities. Finally, this article suggests several policy options for reducing consumption expenditure inequality.