Inequality Reduction in Mongolia: A Dynamic Income Source Analysis

Zagdbazar, Manlaibaatar (2025): Inequality Reduction in Mongolia: A Dynamic Income Source Analysis.

Abstract

Mongolia's Gini coefficient decreased by 26% over the past 15 years (2007-2022). This period, marked by a mining boom and bust cycle and great economic transformation. This study finds that the reduction in inequality is attributed to shifts in household income composition, including rising shares of wage income and government transfers, and declining shares of self-employment and own-consumption income. The expansion of the formal labor market, particularly in mining, trade, and finance, alongside social welfare programs like child benefits and pensions, has been pivotal. Interestingly, income from own consumption of housing, which has not been extensively considered in the literature, contributed most to the decrease in inequality due to its substantial reduction in both share and concentration. However, herder households remain vulnerable to shocks, and gender/regional disparities persist. This study, analyzing monetary and non-monetary well-being, offers insights into mining-dependent and transition economies seeking inclusive growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: Developing economies, household income composition, income inequality, income sources dynamic decomposition
• Subjects: D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions; D - Microeconomics > D3 - Distribution > D33 - Factor Income Distribution; D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

References

Adams, R. (1999). Nonfarm Income, Inequality and Land in Rural Egypt. Washington DC.: PRMPO/MNSED, Unpublished Report for Comment, World Bank.

Adams, R., & Alderman, H. (1992). Sources of Income Inequality in Rural Pakistan: A Decomposition Analysis. Working Paper Series, No. 836, The World Bank.

Alvaredo, F., & Gasparini, L. (2015). Recent Trends in Inequality and Poverty in Developing Countries. In A. B. Atkinson, & F. Bourguignon, Handbook of Income Distribution (pp. 697-805). Amsterdam: Elsevier.

Amarante, V. (2016). Income inequality in Latin America: A factor components analysis. Review of Income and Wealth, Series 62, 4-21.

Araar, A., & Duclos, J.-Y. (2007). DASP: Distributive Analysis Stata Package. PEP, World Bank, UNDP and Université Laval.

Awoyemi, T., & Adeoti, A. I. (2004). The decomposition of income inequality by sources of income: the rural Nigerian experience. African Journal of Economic Policy Vol. 11(1), 1-16.

Azam, M., & Shariff, A. (2011). Income Inequality in Rural India: Decomposing the Gini by Income Sources. Economics Bulletin , AccessEcon, vol. 31(1), 739-748.

Babatunde, R. (2008). Income Inequality in Rural Nigeria: Evidence from Farming Households Survey Data. Australian Journal of Basic and Applied Sciences, 2(1), 134-140.

Batchuluun, A. (2021). The gender wage gap in Mongolia: Sectoral segregation as a driving factor. Review of Development Economics, 1437-1465.

Keifman, S., & Maurizio, R. (2012). Changes in labour market conditions and policies. Their impact on wage inequality during the last decade. UNU-WIDER Working paper No. 2012/14.

Leibbrandt, M., Woolard, C., & Woolard, I. (2000). The Contribution of Income Components to Income Inequality in the Rural Former Homelands of South Africa: a Decomposable Gini Analysis. Journal of African Economies, Vol. 9, No 1, 79-99.

Lerman, R. I., & Yitzhaki, S. (1985). Income Inequality Effects by Income Source: A New Approach and Applications to the United States. The Review of Economics and Statistics, Vol. 67, No. 1, 151-156.

Milanovic, B. (1998). Income, Inequality and Poverty During the Transition from Planned to Market. Washington, D.C.: World Bank.

NSO. (2020). Study of Measuring Shadow Economy. Ulaanbaatar: National Statistics Office.

Oyekale, A., Adeoti, A., & Oyekale, T. (2006). Measurement and Sources of Income Inequality among Rural and Urban Households in Nigeria. PMMA Working Paper, No.20.

Piesse, J., Simister, J., Thirtle, C., & Wiggins, S. (1998). Modernization, Multiple Income Sources and Equity: A Gini Decomposition for the Communal Lands in Zimbabwe. Agricultural Economics Research, Policy and Practice in Southern Africa, Volume 38, Issue sup1.

Pyatt, G., Chen, C.-n., & Fei, J. (1980). The Distribution of Income By Factor Components. The Quarterly Journal of Economics, 451-473.

Rani, U., & Furrer, M. (2016). Decomposing income inequality into factor income components: Evidence from selected G20 countries. ILO Research Paper No.15, 1-41.

Shorrocks, A. (1980). The Class of Additively Decomposable Inequality Measures. Econometrica, Vol. 48, No. 3, 613-625.

Shorrocks, A. (1982). Inequality Decomposition by Factor Components. Econometrica, Vol. 50, No.1, 193-212.

Ssewanyana, N. S., Okidi, A. J., Angemi, D., & Barungi, V. (2004). Understanding the determinants of income inequality in Uganda. CSAE Working Paper Series, 29.

UNECE. (2011). Canberra Group Handbook on Household Income Statistics. Geneva: United Nations.

World Bank. (2024). Poverty and Inequality Platform. Retrieved from The World Bank: https://pip.worldbank.org/home