Determinants of income inequality in urban Ethiopia: A study of South Wollo Administrative Zone, Amhara National Regional State

The main focus of this paper is to analysis of the determinants income inequality among sampled households who find themselves at the bottom and top of the income/consumption distribution in urban centres in South Wollo Adimistrative Zone, Ethiopia. The study covered a total of 600 household heads. An assessment of the values of the General Entropy (GE) indexes is an interesting value that the GE (2) is very high for all urban centers in the study area. Surprisingly, per adult the consumption expenditure inequality is very high at the top of the distribution followed by the bottom adult equivalent consumption distribution. The contribution of the between-groups inequality component to aggregate inequality in these groups (household education head level) was estimated to be 12.96% for GE (0), 14.33% for GE(1) and 13.24% for GE(2), which was higher than other group formation. These results indicate the role of education in consumption expenditures is strongly significant. The results of OLS and quantile regression analysis also show that the household adult equivalent family size, household head main employment status or income sources, quality of houses, household energy sources, durable goods/assets, water and sanitation and place of residence are the main determinants of expenditure/ income inequality of per adult equivalent consumption expenditure across all quantiles distribution. Whereas, the household years of schooling and housing occupancy are the main determinants of expenditure/ income inequality at the bottom and higher quantiles distribution of per adult equivalent consumption expenditure.rnThis finding of the suggests that widening access to education, supporting informal sector, urban agriculture and creation of job opportunities, urban investment to improve access to urban land urban infrastructure, the quality of life and housing development. The policy should be adopted by government and community based organizations so as to reduce urban poverty and consumption expenditure/income inequality.