The measurement of inequality in Fiji's household income distribution

Abstract

PurposeMeasures of inequality determine the effectiveness of social and economic policies aimed at reducing inequality and to design effective intervention policies. The purpose of this paper is to focus on poverty reduction and welfare improving impacts of reducing income inequality in the case of Fiji. Using Fiji's Household Income and Expenditure Survey 2002‐2003, a comprehensive analysis is used to measure the level of inequality by household income, quintile income distribution, decomposition of inequality by ethnicity and regional groups, and the household income inequality by source of income.Design/methodology/approachSeveral statistical techniques have been applied to investigate the degree of inequality in the household income. These include the Gini coefficient, the Nelson ratio, the concentration index and the Atkinson index. An evaluation by ethnicity, regions and household income sources reflects the level of inequality, and concerns for policies and governance.FindingsThe results show that urban households, in particular, experience greater inequalities, in both positive and normative terms. The Indo‐Fijian households experience greater income inequalities than the Fijian households. Decomposition results for the separate factor income components also indicate major sources of inequality. These findings clearly establish that Fiji still has a long way to go in reducing the income gaps between the rich and the poor in both rural and urban households.Originality/valueThe paper is a first study that estimates various measures of inequality in the case of Fiji. The implication of the empirical findings suggests that Fiji is unlikely to achieve its Millennium Development Goal of halving poverty rate by 2015 due to the large income differentials by ethnicity and in the urban‐rural areas.