Abstract:
This study examined Determinants of Income Inequality and its effect on consumption among
Urban Households in Holota Town, Ethiopia, using stratified sampling with kebeles as strata
and collecting data from 350 households, with household expenditure per adult equivalent
serving as a proxy for income inequality. The study distinguished between within-subgroup and
between-subgroup contributions, revealing that between-subgroup inequality were primarily
driven by disparities in housing conditions, education levels, age, family size, and occupational
types, while within-subgroup inequality stemmed from variations in marital status, gender, and
remittance access. Further econometric analysis using Ordinary Least Squares (OLS) and
Quantile Regression (QR) models confirmed that age, gender, education, marital status, family
size, dependency ratio, occupation, and remittances were critical determinants of income
inequality. The findings underscore the need for targeted government intervention, including
family planning programs to address high dependency ratios, women's economic empowerment
to reduce gender-based disparities, education reform to expand access to quality higher
education, affordable housing initiatives to improve equitable access to decent infrastructure,
and formalization of self-employment to enhance productivity in informal sectors. By addressing
structural disparities and demographic factors, stakeholders can foster inclusive growth and
effectively reduce urban income inequality in Holota Town.
