Income Inequality in Northern Pakistan: A Social Issue in Development Process

Abstract

This study was conducted during 2010, in Shangla district of Northern-Pakistan with the objectives to determine the income inequality, concentration of wealth among the rural households and that diversification (last 5 years) of income. Primary data about income on annual basis was collected from randomly selected 323 households by Cochran (1963) formula. Quintile methods, coefficient of variation and descriptive statistics were used for the analysis of data. Main findings of the study revealed that income inequality by quintile before diversification of income of the bottom quintile was Rs.75, 311 by receiving 6.00% of the total household income. The lower middle, middle and upper middle quintiles having an average income of Rs.1, 24, 733, Rs.1, 80, 431 and Rs. 3, 05, 628 per household and receiving 9.79, 14.38 and 23.98 percent of the households respectively. The top quintile household income was Rs.5, 75, 638 per household and receiving 45.86% of the total income and accepts the alternative hypothesis that income is not equally distributed among the rural households, where the null hypothesis is accepted that about 50% of the income comes under the category of the top quintile households. After the diversification of income the bottom quintile lower middle, middle, upper middle and top quintile households have the same percent of wealth as before the diversification of income. Null hypothesis was accepted that after diversification of income the concentration of wealth are decreased and the income of the household increased. The study as a whole concludes the diversification of income leads to decrease the income inequality but the concentration of wealth remain unchanged. The study recommends that to reduce the income inequality diversification may be used as income inequality reeducation strategy and more off-farm employment opportunity like agro-based industrialization may be promoted in the rural areas for bringing them in to the main stream of development by absorbing the surplus labor of the rural households.