Egypt's rural–urban income disparity: is the gap diverging?

Abstract

Although some studies have attempted to assess the rural–urban income gap in the 1960s and 1970s, no study has focused on the evolution of the gap over the past 25 years, let alone the evolution in the real differences in per capita income between the rural sector and the urban one. The objective of this study is to fill the gap in the literature on this topic and to appraise the development in the gap – in nominal and real terms – both on the aggregate per capita rural and urban income levels and in different expenditure size classes from 1981 till 2005, a period which witnessed a revolution in the agricultural policies from intensive government intervention to complete liberalization. The results of the study prove that the gap diverged again from 1994 to 2005 after converging from 1981 to 1994. The study also proves that the gap is more apparent in the middle classes rather than the lower ones. Finally, with respect to food consumption the study concluded that a slight gap may exist in favour of rural – and not urban – Egypt.

Keywords:

• Egypt
• income distribution
• rural–urban income disparity

Notes

1. Starting in 1996, the Institute of National Planning (INP) provided estimates of per capita incomes related to each governorate, but not to rural and urban Egypt in particular. Furthermore, incomes are not estimated according to income bracket.

2. A somewhat similar methodology was used in earlier studies on the rural–urban income gap in the 1960s and 1970s (e.g. Korayem, 1981).

3. The significance of the nominal differences in incomes cannot be assessed without considering the inflation rates in rural and urban Egypt during the period under study, which will be discussed in the next section.

4. The index uses a CAPMAS initial index which selected the base year 1966–67 = 100. As CAPMAS started new indexes with new base years in 1986–87, 1995–96 and 1999–2000, all these indexes were extrapolated to continue with the initial index. Finally, the new index is set to start at 100 in 1980 in order to reflect the period under study.

5. According to World Bank (n.d.) estimates, Egypt's per capita growth rate was modest over the last two decades: it averaged 2.0% annually from 1987 to 1997 and 2.5% from 1997 to 2007.