Spatial income inequality in Rajasthan using small area estimation model

Abstract

India has emerged as the fastest-growing nation in recent years, and rising inequality may obstruct this path, leading to serious socio-economic challenges. This situation has raised the demand for micro-level data among policymakers to facilitate effective decentralised planning and reduce regional disparity. However, the survey data is not ideal for understanding disparities at the disaggregated level because of the small sample size. To overcome this issue, small area estimation (SAE) helps improve the precision of survey estimates by using different administrative data sources. This study examines the district-level income distribution for Rajasthan (largest state of India by area) by combining the India Human Development Surveys (IHDS) in 2004 and 2011 with the population census in 2001 and 2011. The diagnostic test performed in the analysis shows that SAE estimates are more reliable than direct estimates. The spatial mapping of income distribution revealed a rise in income level in rural areas between 2004 and 2011, with a concentration of low-income districts in southern and a few northern regions. In contrast, in urban areas, it is primarily found in the southern part of the state. Additionally, the Gini coefficient shows that inequalities are higher in rural areas compared to urban areas. Using the decomposition feature of the Theil index, the study demonstrates that within-district disparities are more prevalent in both regions. The findings of the study will provide a comprehensive view of income distribution at the micro level, which will further help frame area-specific development strategies.