Income inequality among agricultural households in India: A regression‐based decomposition analysis

Abstract

AbstractThis article assesses the nexus between land and income inequality among agricultural households in rural India based on a national survey of farmers. The study also assesses the contribution of other sources of income to this inequality. At the onset, we estimate the extent of land and income inequality using the Gini coefficient, Palma ratio, and quantile distribution. Further, we examine the effects of income components and sociodemographic, production theory‐related, and geographic variables on total income inequality among agricultural households at the national level using regression‐based inequality decomposition (RBID) analysis of income function. The evidence indicates that both land and income inequality are the maximum in the agriculturally developed states. The results of RBID show that land size explains the highest share of income inequality among agricultural households, followed by crop productivity at the household level. The analysis further statistically validates that the share of wage and livestock income has an inverse relationship with total inequality among agricultural households. These results provide firm empirical evidence to assess policies suggested to increase alternative sources of income among land‐poor petty producers.