Wealth Inequality in India: What extent do Household, Intra and Inter-Regional Factors Matter?

Abstract Using a multilevel modelling approach, this paper analyzes the decomposition of the sources of inequality in households’ wealth in India. On decomposing wealth inequality in India at three nested levels- it is found that around 89-92 per cent of the variance in wealth resulting from households’ characteristics, whereas 2-3 per cent of the variance is coming from the regional landscapes, and the remaining 5-7 per cent stems from state-level features. The paper also analyses the effect of household characteristics on wealth and finally by using the random slope model, we find the effects of household characteristics, which vary significantly between the regions and states. In this context, our results show the negative correlation between the random effect of the share of adults in the household who are literate and the wealth of the region, which tells us that effect of education decrease with wealth. We also observe covariance between the share of adults and wealth negative, which again means that the effect of more possible economically active people decreases with wealth, which could be due to the fact that involvement of adults in economic activity might be less in high wealth region because of the already high level of accumulated wealth. JEL:C31.D31.D63