The Contribution of Income Components to Income Inequality in the Rural Former Homelands of South Africa: A Decomposable Gini Analysis

Households in developing countries adopt livelihood strategies that often rely on income from a diversity of sources. From a policy perspective it becomes important to understand the relative importance of income sources in driving inter-household inequality and poverty. Recent theoretical advances allow for the decomposition of the Gini coefficient by income components and for an assessment of the impact of changes in income components on the Gini coefficient. This paper applies such a technique to South African data for the rural former 'homeland' areas. In doing so, the paper extends existing knowledge of South African income inequality. Particular attention is paid to integrating the decomposition work into debates about rural development policy in South Africa.