Empirical analysis of income inequality and welfare in the forest area of southwestern Nigeria

Abstract

Inequality has been one of the biggest economic, social and political challenges of our time, as high level of income inequality produces unfavourable environment for economic growth and development. However, there is a dearth of information on the extent or degree which forest income contributes to income distribution and welfare of the rural households. Three states (Ogun, Osun and Ondo states) with highest concentration of forests in southwestern Nigeria were purposively selected, with a total of 430 households randomly selected. Descriptive statistics and Gini coefficient were used in the analyses. Majority of the household heads were male (92.1%), married (89.5%) with 2.4±5.0 years of education and 19.9±14.9 years of residency in the forest area. The primary occupations of the households were farming (65.3%), forest activities (17.9%) and others (16.7%), while 40.7%, 28.1% and 31.1% had forest activities, farming and others as their secondary occupations, respectively. Decomposition of income inequality with all income sources gave income share contribution of farm income (53%), forest income (29), trading (7%), artisanal (2%), transfer (1%) and wage/salary (8%) to total household income. This implied that farm and forest income contributed more to household welfare. The impact analysis of forest income on welfare shows that inequality was 0.52 with all income sources but increased when decomposed without forest income (0.56). This implied that farm and forest income source reduce income inequality in the study area thereby improve the household welfare.

Keywords: Income distribution, Forest income, Gini Coefficient, Household welfare, Inequality