Data on income distribution in Sierra Leone

For Staff Use Only EPD INCOME DISTRIBUTION PROJECT DATA ON INCOME DISTRIBUTION IN SIERRA LEONE Satish Kansal Division Working Paper No. 1982-2 May 1982 Economic and Social Data Division Economic Analysis and Projections Department Economics and Research Staff The World Bank Division Working Papers report on work in progress and are circulated for Bank staff use to stimulate discussion and comment. The views and inter- pretations in a Working Paper are those of the author.  DATA ON INCOME DISTRIBUTION IN SIERRA LEONE (Summary) This paper evaluates Sierra Leone's Household Budget Survey, conducted during 1967-69,and the income distribution estimates derived therefrom. It then derives the adjusted estimates for 1967-69 and com- pares these with the 1974-75 estimates derived by Matlon, et al.(1979). I. Data Sources The basic data source for estimating the income distribution statistics for Sierra Leone is the 1967-69 Household Budget Survey conducted by the country's Central Statistical Office. The other source is the 1974-75 Household Budget Survey, conducted by the Department of Agricultural Economics, Michigan State University, in collaboration with the University of Sierra Leone. The 1974-75 survey was basically a rural household survey. However, it also collected data on urban household income as part of a study of rural-urban migration carried out in conjunction with the 1974-75 household survey. II. A Brief Description of the 1967-69 Survey The 1967-69 survey covered all households in the country. It was conducted during 1967-68 in urban areas and during 1969 in rural areas. For household income and expenditures, the previous month was used as the reference period. For certain items the data were collected for the past one year. The survey sample contained 3,331 households, constituting about 0.7 percent of total households in the country. Out of the total sample, 1,193 households were from urban and 2,138 from rural areas. A household was defined as a single person or group of persons living together who pool their resources to provide for food, clothing,  -2- housing and other living essentials. The survey report did not explicitly give the definition of household income. For income distribution purposes, household income covered-only monetary incomes. It excluded all non-monetary incomes received in-kind, home-produce consumption and the imputed rents of non-renter households. III. Evaluation of the 1967-69 Survey and Data Adjustments Although the survey sample included 1,193 urban and 2,138 rural households, the tabulated results were based on 912 urban and 1,768 rural households. This gave non-enumeration rates of 23 and 17 percent respectively in the two areas. We assumed that the distribution of enumerated sample households in each area was representative of that area. In the survey about 10 percent of urban and 9 percent of rural households had reported zero income. Many of these households, on the other hand, owned consumer durable goods like refrigerators, fans, sewing machines, etc. We distributed these households in the four lowest income groups as-their percentages owning durables were of the same order as those of these four income groups. The survey report gave only the distribution of households by monetary income classes and did not provide the corresponding distribution of household incomes. We estimated average incomes by using Mehran's Portable method which assumes Pareto distribution in each income interval. The average incomes so derived were only for monetary incomes and excluded all non-monetary incomes. The important exclusions were the consumption of own-produce and the imputed rents of non-renter households. We estimated average household non- monetary incomes by utilizing the survey data on the distribution of household 4  -3- expenditures by income classes and added them to the monetary incomes in different income groups. IV. Derivation of Household Income Distribution The estimates of household income distribution as derived from the adjusted data are given in Tables 1 and 2. The original income dis- tribution estimates, derived by the country's Central Statistical Office, are given in Table 3. The income inequalities implicit in the adjusted and original survey data are as follows: Household Income Inequality (Gini Ratio) Adjusted Original Urban 0.45 0.52 Rural 0.44 0.60 Combined 0.45 0.59 The rural income inequality, based on the original survey data, was unrealistically high as it covered only monetary income. With adjust- ments for inclusion of non-monetary incomes and under-reported incomes, it was reduced from 0.60 to 0.44. In urban areas too, the income inequality was considerably reduced -- from 0.52 to 0.45. The World Bank's Social Indicator Data Sheets (SIDS), May 1981, gave income distribution data by selected percentiles of households. They seem to have been derived from the 1967-69 survey data without making any adjustments for non-monetary incomes. Table 4 compares the SIDS data on income distribution by selected percentiles of households with the similar data from the adjusted distribution.  -4- V. income Distribution Data in 1974-75 Matlon, et al. analyzed the 1974-75 survey data and worked out the rural and urban income distributions, ranking the households according to per capita/pe -onis-umer iftiomdd- -(Tabl'&'5).' Their estimates of income inequalities (Gini ratio) worked out to be 0.44 for urban and 0.38 for rural areas. They also derived a rural Gini ratio in which households were ranked accordinig to total household income. This showed a higher'inequality coefficient (0.41) as compared to the inequality when the ranking criterion was the per capita income (0.38). Assuming that the rural income inequality differential associated with two different ranking criteria is also applicable in urban areas, the urban household income ineq'uality as implied by Matlon, et al.'s estimate of urban inequality is around 0.47. VI. Conclusion Due to various shortcomings in the 1967-69 survey and 1974-75 survey, their results are not strictly comparable. However, it may tentatively be observed that the income inequality showed a minor change between the two periods. While rural income inequality marginally declined from 0.44 to 0.41, the urban inequality slightly rose from 0.45 to 0.47 during 1967-69 to 1974-75. The data base of Sierra Leone's income distribution is relatively weak. Nevertheless, the adjusted income distribution data showed that the level of income inequality in Sierra Leone is of the same order as the inequality in other African countries. In 1976, the Central Statistical Office conducted a comprehensive household survey. With the availability of the survey results it is hoped that more reliable income distribution estimates will be available for a relatively recent period.  -5- Table 1: HOUSEHOLD INCOME DISTRIBUTION, SIERRA LEONE, 1967-69 (Adjusted) Monthly household Urban Rural Combined income class % share of % share of % share of (Leones) Household Income Household Income Household Income 0 - 10 9.8 1.8 31.0 11.1 26.3 8.5 10 - 20 17.5 6.3 25.2 14.6 23.5 12.3 20 - 30 23.0 12.9 14.2 11.8 16.2 12.1 30 - 40 16.9 12.9 10.5 11.7 11.9 12.0 40 - 60 13.9 15.0 9.4 14.0 10.4 14.3 60 - 80 6.8 10.1 3.9 7.9 4.5 8.5 80 - 100 3.7 6.9 1.3 3.3 1.8 4.3 100 - 200 6.0 17.5 2.9 11.0 3.6 12.8 200 - above 2.4 16.6 1.6 14.6 1.8 15.2 All classes 100.0 100.0 100.0 100.0 100.0 100.0 Gini ratio 0.45 0.44 0.45 Source: Derived from the adjusted survey data. Table 2: INCOME DISTRIBUTION BY DECILES OF HOUSEHOLDS, SIERRA LEONE, 1967-69 Cumulative Cumulative percentage share of income deciles of Urban Rural Combined households 10 1.9 3.6 3.2 20 5.5 7.2 6.5 30 9.6 10.8 10.4 40 15.2 16.3 15.6 50 20.8 22.1 21.0 60 28.4 28.9 28.5 70 37.0 37.2 36.9 80 47.8 48.2 47.8 90 63.0 62.8 62.4 (95) (74.6) (73.1) (73.4) 100 100.0 100.0 100.0 Source: Derived from Table 1. ,  Table 3: CUMULATIVE DISTRIBUTION OF HOUSEHOLDS AND INCOME BY MONTHLY INCOME GROUPS, SIERRA LEONE,/a 1967-69 Urban Rural Urban a.nd Rurlal Monthly earnings Households Income Households Income Households i Income No income reported 10.5 - 8.8 9.2 Less than 10 Leones 16.8 0.7 37.6 5.0 33.2 3.8 Less than 20 Leones 31.5 5.7 60.6 17.1 54.4 13.8 Less than 30 Leones 52.3 17.5 72.6 27.6 68.3 24.7 Less than 40 Leones 66.8 29.1 80.9 37.8 77.9 35.3 Less than 60 Leones 80.9 45.2 90.3 54.3 88.3 1.7 Less than 80 Leones 87.9 56.4 94.2 63.9 92.9 1 61.8 Less than 100 Leones 91.7 64.2 95.5 68.0 94.7 66.9 Less than 200 Leones 97.8 85.0 98.4 83.2 98.3 P3.9 All incomes 100.0 100.0 100.0 100.0 100.0 100.0 Gini ratio 0.52 0.60 0.59 /a Compiled from Household Budget Surveys, 1967-69. Source: National Accounts of Sierra Leone, 1972-73 to 1976-77, Central Statistics Office, Freetown, Sierra Leone, June 1978 (p. 47). * ,  -7- Table 4: INCOME DISTRIBUTION BY SELECTED PERCENTILES OF HOUSEHOLDS, SIERRA LEONE, 1968-69 Cumulative percent of households Percentage share of income SIDS.L/ Adjusted 20 4.5 6.5 40 10.1 15.6 :60 19.2 28.5 80 35.9 47.8 95 66.2 73.4 100 100.0 100.0 Gini ratio 0.56 0.45 1/ Income share of the lowest 60 percent of households is taken from the original source, UN Survey of Economic and Social Conditions in Africa, 1976, p. 75. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  -8- Table 5: INCOME DISTRIBUTION BY DECILES OF HOUSEHOLDS SIERRA LEONE, 1974-75 Cumulative Rural areas- Urban- deciles of North South East Combined areas households 10 1.3 2.5 2.0 1.7 1.0 20 4.2 6.5 5.0 5.1 - 30 8.7 11.7 9.3 9.8 9.0 40 14.4 18.0 15.8 15.9 - 50 21.9 25.6 23.6 23.6 60 31.2 34.9 32.8 32.5 - 70 41.7 46.0 44.1 43.4 37.0 80 54.6 59.4 59.3 56.8 - 90 72.3 76.6 76.9 74.9 63.0 100 100.0 100.0 100.0 100.0 100.0 Gini ratio 0.41 0.34 0.36 0.38 0.44 /a Households were classified by average income per consumer unit. /b Households were classified by average per capita income. Source: Poor Rural Households, Technical Change and Income Distribu- tion in Developing Countries, Two Case Studies from West Africa, by Peter Matlon, et al,, African Rural Economy Program, Working Paper No. 29, Michigan State University, Aichigan, August 1979.  LT .......................................... * :x IpueddV 91........................... ........................ s-aueaea ......................... sUoTisnTU