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INCOME POLARISATION AND POVERTY AMONG RURAL HOUSEHOLDS IN NIGERIA
ABSTRACT
Poverty in Nigeria has been on the increase with consequence for Income Polarisation (IP). The IP which is the sum effect of alienation and identification between two groups at polar ends of the income distribution could worsen poverty. Studies on income distribution and poverty have mostly focused on income inequality to the total neglect of IP. Therefore, the extent and pattern of IP and its relationship with poverty among rural households in Nigeria were investigated.
Data covering households’ socio-economic characteristics and consumption expenditure were obtained from secondary sources through the National Consumer Survey of 1980, 1985, 1992, 1996 and National Living Standards Survey of 2004 conducted by the National Bureau of Statistics. As a result of data collection and cleaning with elimination of households with some missing values considered important for the study, samples of 4,685, 4,044, 5,712, 11,358 and 22,152 households with relevant variables: household’s consumption expenditure, occupation, gender, education, age, household size and marital status were used for the survey periods. Analysis was done for the six geopolitical zones of rural Nigeria. Data were analysed using Duclos-Esteban-Ray (DER) polarisation index, Foster–Greer–Thorbecke poverty index and Tobit regression at p=0.05.
Mean per capita household expenditure at 1980 prices was lowest (N89.75 ± N60.31) in 1996 and highest (N1,124.78 ± N1,072.00) in 2004. The IP decreased between 1980 (0.2389) and 1985 (0.2111), increased in 1992 (0.2371), then decreased in 1996 (0.2189) and 2004 (0.1874). The IP was highest in the southsouth in 1980 (0.2551), 1985 (0.1991) and 1996 (0.2147). In 1992, the southeast had the highest (0.2373) while the southwest was highest (0.1851) in 2004. The IP was lowest in the northcentral in 1980 (0.2019) and 1985 (0.1753). The southwest (0.2119) and northwest (0.1885) had the least values in 1992 and 1996 respectively. In 2004, the southsouth had the least IP of 0.1757. Among farming households, IP was highest (0.2169) in 1980 and lowest (0.1792) in 1985. Nonfarming households had highest IP (0.2115) in 1980 and lowest IP (0.1806) in 2004. Male IP (0.2411) was higher than that of female (0.1792) in 1980. Also in 1996, IP was higher for male (0.1958) than female (0.1890). Except in 1992 when IP for educated households was higher (0.2140) than that of non-educated (0.2120), the other periods had noneducated being more polarised. Non-wage employed had higher IP over the periods with 0.1833 than wage employed 0.1799 in 2004. Polarisation increased with poverty level at N714.80 poverty line. A unit increase in age, household size and poverty significantly increased IP by 0.01%, 0.01% and 0.73% respectively. However, years of education and being married significantly decreased IP by 0.01% and 0.27% respectively.
TABLE OF CONTENTS
Title page …………………….…………..………………………………………………………. i
Abstract …………………………………..………………………………………………………… ii
Dedication ………………………..……….……………………………………………………… iv
Acknowledgements ……………………..……………………………………………………… v
Certification ……………………..……….……………………………………………………… vi
Table of contents ………………………..……………………………………………………. vii
List of tables ……………………..……….……………………………………………………. xiii
List of figures ………………….……………………………………………………………… xiv
List of abbreviations and acronyms ……………………………………………………………………… xvi
CHAPTER ONE INTRODUCTION
1.1 Background to the study ……………………………………………………………………. 1
1.2 Statement of the problem ………………………………………………………………………….. 2
1.3 Research objectives …………….…………………………………………………………… 4
1.4 Justification of the study ……………………………………………………………………… 4
1.6 Plan of the Study ……………..……………………………………..……………………….. 8
CHAPTER TWO LITERATURE REVIEW
2.1 Theoretical framework …………………………………………………………………………………….. 9
2.1.1 Theories of income distribution ……..……….………………..…………………………… 9
2.1.1.1 Functional income distribution theory ………….………………..…………………….. 9
2.1.1.2 Neoclassical theory of income distribution ………………….…………………………. 9
2.1.1.3 Size distribution of income theory…………..………………….………………………… 9
2.1.2.1 Theory and measures of income polarisation………………………………………………… 10
2.1.2.2 Polarisation in normalised density distribution …………………………………………….. 18
2.1.2.3 Extended measure of polarisation ………………………………………………………………. 19
2.1.3 Measure of inequality …………………………………….……..…………………………….. 20
2.1.4 Analysis of covariance regression model ……………………………………………………….. 21
2.1.4.1 Empirical studies on regression analysis with multiplicative interaction coefficients (Analysis of covariance)……………………….21
2.1.4.2 Importance of multiplicative interaction terms in ANCOVA model…………………22
2.1.5 Poverty phenomenon in Nigeria ………….…….……………….……………………….23
2.1.5.1 Meaning of poverty ……………………………..…………………….………………………23
2.1.5.2 Poverty measurement and indicators ……………………………………………………..24
2.1.5.3 Poverty levels in Nigeria …………………………………………………………………..25
2.1.5.4 Factors that affect poverty among households ………………………………………………28
2.2. Conceptual framework ………………………………………………………….……………………..29
2.2.1 Concept of Income ……………………………….………………………………………………..29
2.2.2 Concept of polarisation …………………………..………………………………………………..30
2.2.3 Polarisation, poverty and their Linkage ……………………………………………………….32
2.4 Synthesis of reviewed literature ……………………………………….……………………………..36
2.4.1 Synthesis of reviewed literature on polarisation indices …………………………………….36
2.4.2 Synthesis of reviewed literature on analysis of covariance regression …………………40
CHAPTER THREE METHODOLOGY
3.1 The scope of study ………………………………………………..…………………………………42
3.2 Data analysis ………………………………………………………..………………….……………..43 3.2.1. Measures of income polarisation along socio-economic and geographical dimensions over the period 1980-2004………..……………………….43
3.2.2: Measures of income bipolarisation along socio-economic and geographical dimensions over the period 1980-2004………………………………….45
3.2.2.1 Lasso de la Vega and Urrutia (LU) (2006) bipolarisation index ………………………45
3.2.2.2 Foster-Wolfson (1992) Index ……………………………………………………….……………46
3.2.2.3 Tsui and Wang (TW) bipolarisation index ……………………………………………………47
3.2.3 Estimation of inequality ………………………………………………………………………………..49
3.2.3.1 The Gini-coefficient ………………………………………………………………………………….49
3.2.3.2 The Generalised Entropy (GE) Class of measure……………………………………………49 3.3 Relationship between income polarisation, poverty and
socio-economic variables of the rural households ……………………………………………….50
3.3.1 Relationship between income bipolarisation and poverty among
rural households …………………………………………………………………………………………..50
3.3.2 Linking poverty with Polarisation …………………………………………………………………..52 3.4 Analysis of the relationship between polarisation and
socio-economic variables …………………………………………………………………………………53 3.5 A priori expectations of the coefficients …………………………………………………………….56
3.6 Definition and explanation of variables ……………………………………………………………..56
3.7 Underlying assumptions for the analysis ……………………………………………………………61
3.8 Limitations of the study .62
CHAPTER FOUR RESULTS AND DISCUSSION
4.1 Socio-economic features of households…………….………..……………………………..63
4.2 Extent and pattern of polarisation and bipolarisation ………………………………………63
4.2.1 Pattern of polarisation among the rural households ….……………………………………..63 4.2.2 Pattern of income bipolarisation among the rural households by FW and LU indices ………..………………….……………………….66
4.2.3. Pattern of polarisation and inequality ……………………………………………………..69 4.3. Pattern of income polarisation and bipolarisation along socio-economic and geographical dimensional groupings …………………………………71
4.3.1.1 Extent and pattern of bipolarisation between household demographic groups ……………………………………………………………71
4.3.1.2 T-test comparison of FW and TW bipolarisation estimates between household demographic groups …………………………………………………….75
4.3.2 Polarisation and bipolarisation within sub-populations
of the rural households …………………………………………………………………….…………..77
4.3.2.1 Polarisation and bipolarisation within farming households ……………………………..77
4.3.2.2 Polarisation and bipolarisation within non-farming households ……………………….79
4.3.2.3 Polarisation and bipolarisation within households located in the north …………………………………………………………………………………….79
4.3.2.4 Polarisation and bipolarisation within households located in the south …………………………………………………………………………….81
4.3.2.5 Polarisation and bipolarisation within male and
female household heads ……………………………………………………………………………..81
4.3.2.6 Polarisation and bipolarisation within wage and non-wage ……………….……………83
4.3.2.7 Polarisation and bipolarisation within formally educated and non-formally educated household heads .…………..……………….……………..85
4.3.2.8 Overview of implications of polarisation and bipolarisation estimates within the households’demographic features……………………………………85
4.3.3 Income polarisation and bipolarisation within the
six geopolitical zones…………………………………………………………………………………….92
4.3.4 Polarisation within socio-economic dimensions in the six geopolitical zones………………………………….…………………….……………………….98 4.3.4.1 Polarisation among farming households across zones……………………………………..99
4.3.4.2 Polarisation among non-farming households across zones……………………………….99
4.3.4.3 Polarisation among retirement age and non-retirement age across zones………….101
4.3.4.4 Polarisation among male and female household heads across zones………………..104
4.3.4.5 Polarisation among formally educated household heads across zones……………..106
4.3.4.6 Polarisation among non-formally educated household heads across zones……….106
4.3.4.7 Polarisation among wage employment household heads across zones……………..108
4.3.4.8 Polarisation among non-wage employment household heads across zones………110
4.3.4.9 Implications of pattern of polarisation estimates on middle class within the demographic features across the six geopolitical zones…………………..111
4.4 Poverty and income bipolarisation among the rural households…………………………..115
4.4.1 Relationship between poverty and income bipolarisation ………………………………..115 4.4.2 Income polarisation and poverty in all the states of Nigeria
in 2004 ………………………………………………………………………………………………………119
4.5. Regression analysis of the relationship between polarisation, poverty status and socio-economic characteristics ……………………………………………119 4.5.1 DER polarisation Tobit regression results ………..…………………………………….119
4.5.2: Variables that affect income polarisation ………………..……………………………….120
4.5.2.1 Effects of household head’s age on income polarisation ……………………………….120
4.5.2.2 Effects of household size on income polarisation …………………………………………120 4.5.2.3 Effects of household’s father’s and mother’s years
of formal education on income polarisation ………………………………………………..120
4.5.2.4 Effects of household’s poverty status on income polarisation ………………………..123
4.5.2.5 Effects of household head’s gender on income polarisation.. …………………………123
4.5.2.6 Effects of household head’s marital status on
income polarisation ………………………………………………………………………………….124
4.5.2.7 Effects of farming on income polarisation …………………………………………………. 124
4.5.2.8 Effects of wage employment household head
on income polarisation ……………………………………………………………………………. 124
4.5.2.9 Effects of household geographical location
on income polarisation ……………………………………………………………………………..125
4.5.2.10 Poor and non-poor households’ polarisation, given age of household head, household size, and father’s years of formal education ………………………125
4.5.2.11 Female and male household heads’ polarisation,
given the age of household heads …………………………………………………………….126 4.5.3 Total interaction effect of variables that affect polarisation ……………………………..126
4.5.3.1 Total effect of poor-female household head on polarisation ………………………….126
4.5.3.2 Total effect of poor-married household head on polarisation …………………………127
4.5.3.3 Total effect of poor-farming household on polarisation ………………………………..127
4.5.3.4 Total effect of poor-wage employment on polarisation ……………………………….. 127
4.5.3.5 Total effect of poor south-located on polarisation ………………………………………. 129
4.5.4 Implications of polarisation regression findings ……………………………………………. 129 4.6. Regression analysis of the relationship between FW bipolarisation,
poverty status and socio-economic features of households ………………………………..129 4.6.1 FW bipolarisation Tobit Regression Results…………………………………………………..129
4.6.2 Variables that affect income bipolarisation …………………………………………………….130
4.6.2.1 Effects of household head’s age on income bipolarisation …………………………….130
4.6.2.2 Effects of household size on income bipolarisation …………………………………….. 130
4.6.2.3 Effects of household’s father’s and mother’s
years of formal education on income bipolarisation ……………………………………..130
4.6.2.4 Effects of household’s poverty status on income bipolarisation ……………………..133
4.6.2.5 Effects of household head’s gender on income bipolarisation ………………………..133
4.6.2.6 Effects of household head’s marital status
on income bipolarisation …………………………………………………………………………..133
4.6.2.7 Effects of farming on income bipolarisation ………………………………………………..134 4.6.2.8 Effects of wage employment household head
on income bipolarisation …………………………………………………………………………..134
4.6.2.9 Effects of household geographical location
on income bipolarisation …………………………………………………………………………..134
4.6.2.10 Poor and non-poor households’ bipolarisation, given age of
household head, household size, and father’s years of education ………………….135
4.6.2.11. Female and male household heads’ polarisation,
given father’s year of formal education ……………………………………………………135
4.6.3 Total interaction effect of variables that affect bipolarisation …………………………..136
4.6.3.1 Total effect of poor-female household head on bipolarisation ……………………….136
4.6.3.2 Total effect of poor-married household head on bipolarisation ………………………136
4.6.3.3 Total effect of poor-farming household on bipolarisation ……………………………..136
4.6.3.4 Total effect of poor-wage employment on bipolarisation ………………………………138
4.6.3.5 Total effect of poor south-located on bipolarisation ……………………………………..138
4.6.4. Implications of bipolarisation regression findings ………………………………………….138
CHAPTER FIVE SUMMARY, CONCLUSION AND POLICY
RECOMMENDATIONS
5.1 Summary…………………………………………………………………………………………….140
5.2 Conclusion of the study ……………………………………………………………………….143
5.3 Contribution to knowledge …………………………………………………………………………….144
5.4 Policy implications and recommendations………………………………………………………..144
5.5 Suggestions for further study ………………………………………………………………………….145
REFERENCES ………………………………………………………………………………………..147
APPENDICES ……………………………………………………………………………………… 155
CHAPTER ONE INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Income distribution analysis is a phenomenon that has attracted the attention of researchers in recent times. The importance of income becomes more apparent as poverty is characterised by low income. About 52 and 61 per cent of Nigerians lived on less than US$1 per day in 2004 and 2010 respectively, implying 39 per cent living on above US$1 in 2010 (NBS, 2012). This is indicative of the uneven distribution of income in Nigeria; while some people are in the lower part, some are in the middle class and the remaining in the upper group. According to NBS (2007), the high rate of poverty and income inequality have threatened the Nigerian middle class with extinction, creating doubts about the relevance and impact of most macroeconomic reforms of the past. Polarisation exists if the distribution is at either side of the divide, lower or upper class, with the middle class shrinking or becoming extinct; and such income distribution is said to exhibit polarisation (Chakravarty and Majumder, 2001; Vander puye-Orgle, 2002; Rodriguez, 2006).
According to Chakravarty and Majumder (2001), income polarisation is the decline of the middle class, and there are two types. The first type, called polarisation or increased polarity, occurs if a distribution is more spread out from the middle position to the tails, thus increasing the distance between two groups below and above the median income level. This is a directional movement from the middle level income towards the two ends of the income distribution. The second type is increased bipolarity (bipolarisation) where incomes below or above the middle position become closer to each other. It is a situational gathering of individuals at the two ends of the income distribution and an extreme case of polarisation. Therefore, polarisation engenders clustering of the elements in the income distribution at polar nodes. This markedly shows that income polarisation is quite different from income inequality, another feature of income distribution, which means the overall dispersion of the distribution. But Rodriquez (2006) mentions that many empirical comparisons of inequality and polarisation measures suggest that they are closely related.
1
However, the achievement of equitable distribution of income, alleviation of poverty and eradication of extreme hunger will continue to be major development objectives. In the past, efforts at achieving these in Nigeria include Operation Feed the Nation (OFN), Green Revolution and Directorate of Food, Road and Rural Infrastructures (DFRRI). Other poverty-alleviation related programmes/policies include National Directorate of Employment, FADAMA, Community and Social Development Project (CSDP), Local Empowerment and Environmental Management Project (LEEMP), National Poverty Eradication Programme (NAPEP) and other economic reforms and reconstructions like deregulations and privatization of key sectors of the economy. Some of these programmes/policies positively impacted on the economy; some have negative impact on some socio-economic groups, while some, like Structural Adjustment Programme, reduced poverty in the rural areas (Aigbokhan, 2000). The study, therefore, further shows empirically the extent to which these programmes reduced income polarisation as well as poverty in rural Nigeria.
1.2 STATEMENT OF THE PROBLEM
The implementation of economic policies may leave some people poor, make some poorer and others rich. According to Aigbokhan (2000), there might have been increased polarisation in income distribution, resulting in a wider gulf between the poor and the rich, shown by reducing middle class. The high rate of poverty and inequality that threaten the existence of the middle class creates distrust for the importance and effect of most policies (NBS, 2007). The disappearance of the middle income group, occasioned by movement of households in middle income to both the lower and upper tails of the distribution, would make such distribution to be inequitable and, in terms of welfare, some people will be worse off while some are better off. The potential of the crisis such inequality can pose to the system has rekindled researchers‟ interest to understand the causes of income polarisation both in developed and developing countries (Zhang and Kanbur, 1999; Aigbokhan, 2000; Gradin, 2000; Awoyemi et al., 2009).
Awoyemi et al. (2009) identify low level of education, poverty and unemployment as some of the possible causes of polarisation. Progressive income transfers which reduce inequality can also lead to polarisation (Chakravarty and Majumder, 2001). Other factors that can be used to explain polarisation are individuals‟ socio-economic and demographic characteristics which include household size, employment status, gender, age and spatial population (Gradin, 2000). Others are policy shifts and economic structural changes (Gradin and Rossi, 2006). According to Ezcurra (2009), income polarisation is in opposition to regional economic growth and the effect becomes heightened with other variables like education. With the Nigerian population that is spread over a large area with different levels of socio-economic features of households and individuals, one would expect income polarisation to exist with the resultant violence.
Polarisation is related to the alienation that individuals and groups feel from one another, fuelled by ideas of within-group identity. Group identity and alienation are essential to polarisation and enhance social tensions and revolt. The high rate of poverty and the majority of the poor living in the rural area reduce the middle class in Nigeria. An income distribution that is polarised between households or between and within male- and female- headed households, for instance, gives a situation that could breed antagonism and conflict among these groups as a result of envy, feelings of deprivation and dissatisfaction. Conflict could lead to disruption of peace and destruction of social infrastructure and other physical structures like houses. If the conflict starts in the rural area, some people may leave for semi-urban and urban areas, thereby aggravating ruralurban drift. There could also be spill-over effect of the conflict to the urban areas. This is a possibility as 70 per cent of the population lives in the rural areas (Akinyele, 2009). The economy would also be negatively affected as the rural sector was reported as highest contributor (41.84%) to Nigeria‟s GDP in 2009 (NBS, 2010). Examining polarisation within and between socio-economic groups would engender the possibility of determining which characteristics contribute more to income polarisation through comparisons.
There is evidence of polarisation in Nigeria. Aigbokhan (2000) reports national polarisation of 0.64, 0.65 and 0.53 for 1985, 1992 and 1996 respectively, while in 1996, there was polarisation of 0.51 in the rural sector. Also, polarisation of 0.24 in 2004 was reported by Awoyemi et al. (2009). This shows that there is a widening income gap between the two extreme income bands due to polarisation coupled with rising poverty level among the rural households. The rising social tension in the urban and semi-urban areas may be considered the spill-over effect of income polarisation in the rural areas.
These are the problems and issues on which there is a dearth of empirical evidence and little insight in the country. Therefore, it is necessary to examine income polarisation and bipolarisation in rural Nigeria and its relationship with poverty among rural households. Consequently, the following questions are germane to the study:
What is the pattern of income polarisation and bipolarisation among the Nigerian rural households?
What is the pattern of income polarisation and bipolarisation in the rural sector of Nigeria along socio-economic and geographical dimensions?
What is the linkage between poverty and bipolarisation?
What are the effects of socio-economic characteristics on income polarisation?
1.3 RESEARCH OBJECTIVES
The main objective of the study is to examine the incidence and extent of income polarisation and its relationship with poverty among the rural households in Nigeria. The specific objectives are to:
analyse the extent and pattern of income polarisation and bipolarisation in the rural sector of Nigeria over the period 1980-2004,
analyse the pattern of income polarisation and bipolarisation along socio-economic and geographical dimensional groupings,
establish the linkage between poverty and bipolarisation, and
determine the effects of socio-economic characteristics on income polarisation.
1.4 JUSTIFICATION OF THE STUDY
Polarisation is a phenomenon referring to the disappearing middle class (Wolfson, 1997; Aigbokhan, 2000; Chakravarty and Majumder, 2001; Vanderpuye-Orgle, 2002) and a more polarised income distribution is one that is more thinned out from the middle, allowing fewer individuals or families/households with middle level income (Gradin and Rossi, 2006). The concept has so far not been apparent in the income-welfare dialogue in Nigeria as many studies have been done on income distribution analysis with main focus on inequality. Some of such studies are Aigbokhan (2000), Alayande (2003), Awoyemi (2004), Awoyemi and Adeoti (2004), Olaniyan and Awoyemi (2005), Oyekale et al. (2006) and Babatunde (2008). Aigbokhan (2000) notes that it is not sufficient to establish whether there was a rise or reduction in inequality during economic reforms but it is more important to determine if such change gave rise to polarisation. According to him, if there is polarisation, the consequent social tension may have implications for the sustainability of the reform.
This study, therefore, becomes appropriate from the foregoing due to the fact that economic reforms have been undertaken in Nigeria between 1980 and 2004. Many programmes targeted at improving rural income and welfare have been implemented as well during these periods. However, there is paucity of knowledge on income distribution analysis that focuses on polarisation in Nigeria because outcomes of empirical research on the problem of disappearing middle class with the Nigerian data are very lean. Apart from the pioneering works of Aigbokhan (2000) and the work of Awoyemi etal. (2009), there has not been enough literature aimed at addressing the issue. Aigbokhan (2000) establishes inequality and polarisation trends for both the rural and urban sectors in Nigeria, using three data sets of 1985, 1992/93 and 1996/97. The study analysed poverty level, using food energy intake variant of the consumption-based method. It used Ginicoefficient to determine inequality and Wolfson polarisation index for the trends and levels of polarisation. Poverty, inequality and polarisation estimates by gender and geopolitical zones were generated for the three data sets. The study indicated that there was positive growth during the period with increased poverty, inequality and polarisation in income distribution.
On the other hand, Awoyemi etal. (2009) used different multiple indices to establish polarisation with two data sets of 1996 and 2004. The study used Duclos-
Esteban-Ray Polarisation Index (2004) with identification parameter, α = 0.5; Foster- Wolfson Bipolarisation Index (1992); Esteban-Gradin-Ray Polarisation Index (1999) and Zhang-Kanbur Index (2001) for dimensions of polarisation determination. Further, the study used decomposition approach of Duclos et al. (2004) to determine income polarisation among sub-groups on occupation, gender, education and geographical zone dimensions, and established the contribution of each dimension to total income polarisation.
The difference of this study from that of Aigbokhan (2000) and Awoyemi etal. (2009) is in the use of five data sets as against three of 1985, 1992, and 1996 in the former and two data points of 1996 and 2004 in the latter. Other critical areas of differences between this study and the earlier studies are in the use of Lasso de la Vega and Urrutia Bipolarisation Index (2006) and the exposition of the linkage between poverty level and bipolarisation. Though this study used polarisation index of Duclos, Esteban and Ray
(2004) with identification parameter, α = 1.0 and Foster-Wolfson‟s bipolarisation index like in Awoyemi etal. (2009), years under consideration and methodology differ.
This study applies Duclos, Esteban and Ray Index (2004) to analyse income polarisation among the rural households in Nigeria, using household real consumption survey data of 1980, 1985, 1992, 1996 and 2004; the same data sets used for Nigeria poverty profile analysis by NBS (2005). Duclos, Esteban and Ray Index (2004) dealt with the problems of pre-grouping that characterized Esteban and Ray Index (1994) in measuring polarisation as it is not restricted to pre-grouping of data. Similarly, FosterWolfson (1992) and Lasso de la Vega and Urrutia (LU) (2006) measures of bipolarisation were adopted. Foster-Wolfson is an improvement on and a shift away from inequality measurement as it is derived from the Lorenz curve and the Gini-coefficient. Another reason for adopting DER and FW in the study is because Distributive Analysis Software (DAD) 4.5 (Duclos et al., 2008) is readily available to apply in the analysis.
Foster-Wolfson‟s (1992), Tsui and Wang‟s (1998) and Lasso de la Vega and Urrutia‟s (2006) indices were used to compute bipolarisation indices. Lasso de la Vega and Urrutia‟s bipolarisation index and Foster-Greer-Thorbecke‟s poverty index as demonstrated by Rodriguez (2006) were used to link polarisation with poverty among the rural households to contribute to the concept of polarisation in income distributionpoverty dialogue. It is on this basis that this research is justified as it contributes to the knowledge on income-distribution-poverty dialogue in Nigeria with focus on polarisation and poverty status of rural households in Nigeria.
The linkage of bipolarisation and poverty is desirable due to the fact that poverty level is high in Nigeria with poverty incidence of 54.5% in 2004, while it was 43.2% and 63.3% in urban and rural areas respectively (NBS, 2005). Also NBS (2012) reports that poverty measurement increased to 69% in 2010 and that it could rise to 71.5% in 2011. It is, therefore, worth measuring income bipolarisation between the poor people and the rest of the society and to make policy makers aware of the possible social conflict which could be measured by the bipolarisation index due to poverty (Rodriguez, 2006). Therefore, LU bipolarisation index-linked poverty has been applied to establish if the rural income distribution poses a danger of social conflict in Nigeria.
This is the first time Lasso de la Vega and Urrutia (2006) bipolarisation index is being used on Nigerian data, based on available literature. The analysis of covariance approach by Tobit regression is also a novel approach in polarisation study in Nigeria. Since polarisation is a feature of income distribution and most of the polarisation indices like Foster-Wolfson capture inequality measurement, Gini coefficient and Generalised Entropy (GE) measurements of inequality were adopted in this study for comparing pattern of inequality with polarisation. Aigbokhan (2000) did not use GE and the Wolfon Index used is that proposed by Wolfson (1994). Consequently, this study adds to the lean literature on income distribution-poverty analysis that focuses on polarisation in Nigeria. Rodriguez (2006) submits that the similarities and differences between welfare, inequality and poverty measures are well known but little is known about the meaning of income polarisation in terms of welfare, poverty and inequality. Also in the words of Wang and
Tsui (2000:362), “the literature on polarisation is still small, and much remains to be done”. Thus, the study is relevant methodologically and by literature.
This study can also be justified based on the period (1980 -2004) chosen for the study. With the reforms during the periods, the study could serve as a basis for policy adjustment. The pattern of income distribution remains one source of input to policy formulation and implementation. This study, by exposing the extent of income polarisation, provides a basis for developing appropriate policy and the continuation of existing policies and programmes for improving the income level and its redistribution among rural Nigerians. With appropriate policy, there would be more equitable distribution of income and possible social conflict and tension could be checked.
The study also reveals the extent of the influence of poverty status on income polarisation and the nature of income polarisation among the rural households in terms of gender, other socio-economic variables and geographical dimensions. Some researchers have pointed out that women are rendered poorer than men during adjustment policies
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