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Intra-household Wealth Inequality and Economic Development: Evidence from Karnataka, India

Deepak Malghan and Hema Swaminathan
2017
Working Paper No
487
Body

While wealth inequality has attracted attention in the recent inequality literature, such inequalities within the most elementary social unit -- the household -- remain neglected. We develop an empirical framework for measuring intra-household wealth inequality. Using unique individual-level wealth data from Karnataka, India, we report how a third of overall wealth inequality is attributable to inequality within the household. A significant barrier to interpreting intra-household wealth inequalities is the public goods nature of several household assets. We overcome this limitation with a simple normative framework derived from the Atkinson index. While welfare measures are incommensurable across different households, welfare loss resulting from intra-household inequality are usefully compared across households. We report losses in aggregate welfare for plausible values of the Atkinson inequality aversion parameter.

Recent work suggests a Gender Kuznets (GKC) hypothesis and finds evidence for a non-monotonic relationship between gender inequality and economic development in a country. We extend this literature in two ways. First, we propose a test of the GKC hypothesis at the sub-national level. We proxy economic development at the village level with satellite luminosity data (night lights) and find evidence for a non-monotonic relationship between women’s wealth share at the village level and economic development. Second, we propose a micro-Kuznets hypothesis using intra-household wealth inequality. Results from micro data suggest a negative relationship between intra-household inequality and aggregate household wealth.

Key words
Karnataka, gender wealth gap, intra-household; mean log deviation, inequality aversion parameter, Gender

Intra-household Wealth Inequality and Economic Development: Evidence from Karnataka, India

Author(s) Name: Deepak Malghan and Hema Swaminathan, 2017
Working Paper No : 487
Abstract:

While wealth inequality has attracted attention in the recent inequality literature, such inequalities within the most elementary social unit -- the household -- remain neglected. We develop an empirical framework for measuring intra-household wealth inequality. Using unique individual-level wealth data from Karnataka, India, we report how a third of overall wealth inequality is attributable to inequality within the household. A significant barrier to interpreting intra-household wealth inequalities is the public goods nature of several household assets. We overcome this limitation with a simple normative framework derived from the Atkinson index. While welfare measures are incommensurable across different households, welfare loss resulting from intra-household inequality are usefully compared across households. We report losses in aggregate welfare for plausible values of the Atkinson inequality aversion parameter.

Recent work suggests a Gender Kuznets (GKC) hypothesis and finds evidence for a non-monotonic relationship between gender inequality and economic development in a country. We extend this literature in two ways. First, we propose a test of the GKC hypothesis at the sub-national level. We proxy economic development at the village level with satellite luminosity data (night lights) and find evidence for a non-monotonic relationship between women’s wealth share at the village level and economic development. Second, we propose a micro-Kuznets hypothesis using intra-household wealth inequality. Results from micro data suggest a negative relationship between intra-household inequality and aggregate household wealth.

Keywords: Karnataka, gender wealth gap, intra-household; mean log deviation, inequality aversion parameter, Gender