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

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 Kuznets Curve