Analysis of Spatial Differentials of Income Inequality in Ghana: Application of Bayesian Estimation

Abstract

The prime objective of the study was to introduce the application of a Bayesian method of estimation in the computation of the Gini coefficient. The bootstrap estimation technique was also employed to obtain confidence intervals for the estimated Gini coefficients which were used to statistically analyze the significant change of inter-household income inequality between 2005/06 and 2012/13 in Ghana with emphasis on the sex of head of household. Most of the methods used in calculating the Gini coefficient are numerically determined and many rely on income. This study provides a more statistical way of calculating the Gini coefficient which depends on income and household size. The income gap between the rich and the poor in Ghana increased from 0.507 in 2005/06 to 0.647 in 2012/13. Meanwhile, the percentage change in the unequal distribution of income was higher among all male headed households than their female counterparts. It was also discovered that not only was the spatial differentials of inter-household income inequality between 2005/06 and 2012/13 alarming but also statistically significant. Income inequality remains a threat to the developmental strategies in Ghana. Government and policy makers need to formulate policies and programs targeted at bridging the income gap between the rich and the poor in Ghana.