Abstract
This study examines the drivers of income inequality in a rural, developing economy. The analysis uses data from a national longitudinal survey of rural households and a case study in Mozambique’s Limpopo River Basin and to investigate how economic integration affects income inequality within environmentally-embedded economies. Decomposition of the Gini coefficient finds increasing inequality of agricultural income at the national level. Qualitative findings suggest that economic change pressures smallholders to abandon traditional agricultural strategies, which increases environmental risk and contributes to higher inequality. Results indicate changing environmental-economic trade-offs are one mechanism behind rising inequality in rural societies integrating into the global economy.
Highlights
Evidence of rising inequality within countries highlights the importance of understanding mechanisms driving this phenomenon, among the world’s poorest societies (Milanovic, 2003, 2005, 2012; Heshmati, 2007; Meschi and Vivarelli, 2009; Chotikapanich et al, 2012; Rodríguez-Pose 2012)
Inequality in rural regions of Mozambique rose from .568 in 2002 to .585 in 2005, according to the Gini coefficient calculated using the TIA surveys.3. This effectively translates into a 3 percentage point increase within three years—a fairly substantial rise in inequality over a short period of time (Ferreira, Leite, and Litchfield, 2008) and a rate of increase slightly higher than those recently observed in the U.S and China, two countries noted for rising inequality (CIA, 2013)
With the exception of agricultural production income, the magnitude of inequality-enhancing effects of all income sources decreased over the time period of the study
Summary
Evidence of rising inequality within countries highlights the importance of understanding mechanisms driving this phenomenon, among the world’s poorest societies (Milanovic, 2003, 2005, 2012; Heshmati, 2007; Meschi and Vivarelli, 2009; Chotikapanich et al, 2012; Rodríguez-Pose 2012). Rural Mozambique provides a useful case for identifying the channels through which economic policy influences the incomes of people living in isolated rural places often considered to be at the margins of the global economy. Understanding how such processes work in these regions provide broader lessons, for facilitating development in other rural regions in LDCs. This research expands on previous work on economic restructuring and rural livelihoods in Mozambique by examining how drivers of national income inequality may change in response to globalization. This paper explores how localized explanations of inequality-enhancing processes illuminate national patterns of income disparities, which themselves are part of global changes and trends
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