Socioeconomic Determinants of Income Inequality Among Smallholder Arable Crop Farmers in Nigeria

Abstract

Income is one of the yardsticks for measuring standard of living, and the inequality in its distribution makes smallholder crop farmers more trapped in abject poverty. In this paper, we examined the influence of household income sources on the overall income inequality and the contributions of households' socioeconomic characteristics to income inequality. We sourced our data from the 2nd wave of LSMS-Integrated Surveys on Agriculture General Household Survey Panel 2012/2013 conducted by the Nigerian Bureau of Statistics (NBS) and the World Bank (WB). The survey used a two-stage sampling technique; the first stage involves the selection of Enumeration Areas (EAs), which represent the primary sampling unit, using probability proportional to size (PPS) of the EAs in each state and the FCT. A total number of 1888 smallholder crop farmers with complete information were considered for this study. The methods adopted in analyzing the data were: Gini-coefficient decomposition by income sources and regression-based factor decomposition of inequality. To better reflect households' welfare, we used per adult equivalent household income as an alternative to total income. The result showed that the total income was ₦249,874,122.90 ($1,588,418.6) with an average income per adult equivalent of ₦132,348.60 ($841.30). The Gini decomposition revealed that the overall Gini index is 0.713, which indicates high-income inequality among farming households. Among all the income sources considered, crop income, non-farm income, and transfer income decreased income inequality while livestock income increased income inequality. The regression-based decomposition shows that majority of the variables selected to represent the socioeconomic factors have an increasing effect on income inequality. In contrast, variables such as age, gender, marital status, farm size, education, and dependency ratio have a significant impact on the adult equivalent household income. This study recommends that a land redistribution policy that will increase the farm size of farmers to boost small-scale crop production is necessary to bridge the gap of income inequality, promotion of improved technologies that will enhance farm household productivity. Lastly, policymakers should lay more emphasis on the mobility of transfer income from within and outside the country to fight inequality, given its decreasing effects on the overall inequality.