"Determinants of Income Inequality and Its Effect on Consumption among Urban Households in Holota Town, Ethiopia”

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.