Decomposing spatial inequality in Sri Lanka: A quantile regression approach

Abstract

This paper uses the Blinder and Oaxaca decomposition method and its recent expansion (Machado and Mata) to examine whether well-being gaps between urban (richer regions) and rural (poorer regions) areas are the result of (i) regional/spatial differences in household characteristics or (ii) differences in location-specific returns to these characteristics. The data used in this study are from the Household Income and Expenditure Surveys for 2006/2007 and 2009/2010. The analysis suggests that the existence of barriers, such as remoteness and poor access to markets, that prevents lagging regions from being absorbed into the modern sector or growing region plays a larger role in perpetuating spatial inequality, especially for the poor, than disparities in household characteristics (endowments) between regions and sectors.