Title : Income Inequality in Bangladesh


Authors : Md. Sharif Hossain

Abstract : By the grace of Almighty Allah, the book “Income Inequality in Bangladesh” has been written to bring together, in a single body, various aspects of formal analysis of income distribution and redistribution of Bangladesh since 1970s. Inequality of income or of consumption is related practically to all important problems of society, as cause or as effect. But in general, one should to compare the situations, when one is less unequal than the other. Also, one should to determine the amount of redistribution from richer household to poorer household in order to reduce income inequality. During the last decades the interest of researchers in the analysis of the size distribution of households income and the redistribution of incomes has increased substantially. One most important effect of this has been the discussion of relevant tools for comparing two or more size distribution of incomes with respect to their income inequality and social welfare. Despite the plenitude of papers on income distribution there is still a need for surveys on this topic. More precisely in this study our interest will be focused on measures of income inequality for three sectors namely, national, urban and rural sectors of Bangladesh, to compare the income differentials between urban and rural sectors and also to compare income inequalities between different decades. In the past decades, a few of works have been done on income inequality in Bangladesh. Among them the works have been done by Chowdhury (1974), Osmani (1982), Osmani and Rahman (1986), Rahman and Haque (1988), Motiur Rahman (1988), Motiur Rahman and Huda (1992) are worth mentioning. These types of investigations dealt mainly with the causes of higher inequality and measuring income inequality within the sub-populations and determining the amount of inequality accounted for between the sub-populations. Most of their investigations reveal that in Bangladesh income inequalities are increasing over time. But none of them determined the amount of money that needs to be transferred from richer households to poorer households in order to attain lower level of inequality. Moreover they have not tested whether changes in inequality from one period to another period or income inequality between urban and rural sectors are statistically significant or not. The present study has tried to determine the amount of money that needs to be redistributed from one year to another year in order to reduce the income disparity over time, and from urban area to rural area to reduce regional income disparity. In this study, I have applied the Bootstrap method to test whether changes in inequality from one period to another period and income differentials between urban and rural sectors are statistically significant or not. In this book, I have also compared the social welfare situation among three sectors national, urban and rural in the context of Atkinson measures of inequality. For analyzing the size distribution of household income, the Lorenz curve is a most powerful tool. In this book, a new functional form for estimating Lorenz curve has been introduced for analyzing the size distribution of household income of Bangladesh. Also, in this book, I have discussed the different tools that are used for measuring income inequality for the aforesaid sectors of Bangladesh and also for comparing their size distribution of incomes with respect to their inequality. Empirical investigation to measure income inequality has been done by applying two categories of inequality measures; measures that describe inequality in an objective sense employing some statistical measure, and in terms of some normative notion of social welfare such that a higher degree of inequality corresponds to a lower level of social welfare for a given total of income. This book has been organized as following introductory chapter one, some important functional forms along with a new functional form for estimating Lorenz curve from grouped data are presented in chapter two. In chapter three, I have revisited the restriction of different functional forms for estimating Lorenz curve from grouped data providing to a new general functional form. I have compared these alternatives forms by goodness of fit test, F-test of nested forms and the measurement of the Gini coefficients. Graphical descriptions of the size distribution of household income have been given in chapter four, while in chapter four, I have discussed different inequality measures and also I have presented the comparative status of income inequality between urban and rural sectors of Bangladesh. In this chapter I have addressed the issues, (i) is the income distribution of Bangladesh improved or worsened? (ii) what is the amount that would be required to be equalized the income distribution from one period to another period? (iii) what is the status of economy of Bangladesh? (iv) how many years that Bangladesh would need to reach the current standard of living that are being enjoyed in a developed/ industrialized country? (v) how many years Bangladesh would need to eliminate the per capita income gap that is now existing with a developed/industrialized country? (vi) how fast would Bangladesh have to grow the per capita income for equalizing its per capita income with that of a developed/industrialized country within a definite time period? (vii) is the income distribution of Bangladesh going to follow the Kuznets’ hypothesis? (viii) what factors are responsible for income disparity? and (ix) what are the impacts of income disparity on economic development, social and political stability in Bangladesh? In chapter five, I have discussed the Bootstrap method and applied this technique to test, whether changes in income inequality from one period to another period and also to test whether the income disparity between urban and rural sectors in Bangladesh are statistically significant or not. I hope, that the book will be very useful to postgraduate and graduate level of students of Economics, Statistics, Business and to academics engaged in research on income distribution in less developed and developing countries. Also this book will be very useful to the persons of national and international agencies policy makers for formulating policies which will ensure economic development in less developed countries. This book has grown out of my doctoral dissertation carried out in the Department of Economic Engineering, Faculty of Economics, Kyushu University, Japan, during the years 1999-2002. It is to be mentioned here that I am in great debts to my supervisor Professor Chikayoshi Saeki, Professor of Econometrics, Department of Economic Engineering, Faculty of Economics, Kyushu University, Japan, in developing the ideas contained in this book. The very idea of undertaking this research was suggested by him, and throughout the various stages of its preparation he went though the drafts with painstaking care, advised me, and saved me from numerous errors. For other inadequacies or errors that may still remain in the book the author is totally responsible. I take this opportunity to express my deepest gratitude to him. I am also grateful to my revered teacher Dr. A.B.M. Sobhan Miah, Professor of Statistics, Department of Statistics, Jahanginagar University, Savar, Dhaka, and also to my dear colleague Md. Humayun Kabir, Assistant Professor, Department of Geography and Environment, University of Dhaka for their valuable suggestions, and comments. I would like to express my deep indebtness to my wife, Tahmina Jarin for her sincere co-operation. I gratefully acknowledge the co-operation and helps received from Professor. Dr. Aka Firoz, towards the publication of this book.


Journal : Volume : Year : February, 2007 Issue :
Pages : 207 City : Dhaka Edition : First Editors : Professor Dr. Md. Sharif Hossain
Publisher : Osder Publications ISBN : ISBN : 984-8711-09-0 Book : Chapter :
Proceeding Title : Institution : Issuer : Number :