MAKERERE UNIVERSITY

College of Business and management science

School of statistics and applied Economics

A research proposal submitted to the school of statistics and planning in partial fulfillment

for the award of bachelor’s degree in quantitative economics

BY Ngabitsinda Albert le Grand

BSQE

16/X/2251/PS

216002298

TOPIC: IMPACT OF INCOME DISPARITIES ON THE LEVELS OF EDUCATION

CASE STUDY:UGANDA

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 CHAPTER ONE

INTRODUCTION

1.0 Introduction

Income disparity or inequality refers to the difference between the income of the richer and the
poorer parts of the society, Disparity usually refers to a difference that is unfair.

1.1 Background

In the past years, there has been a growing concern about the rising of income disparities in the
people of Uganda.

Although poverty levels have been falling, Uganda is now ranked 17th among the countries with
the highest level of income inequality in Africa according to the report published by the united
nations economic commission for Africa (UNECA) titled ”Urbanization and industrialization
for Africa transformation”, according to this report the Uganda Gini coefficient for income
inequality is at 0.45,which makes Uganda worse than Tanzania (0.36) and Burundi (0.33) but
better than Rwanda (0.51) and Kenya(0.48)

Income inequality is of fundamental interest not only to economists, but also to other social
scientists to assess the impact of income disparity on the society. Therefore there is need to
investigate the impact of income inequality on socio economic factors , in order to reduce
problems resulting in the continuous increase in income disparity . They are many channels
through which economic inequality or disparity influences these factors.

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1.2 Statement of the problem

According to the OXFAM International report of 29 march 2017, 10% of Uganda’s population
(estimated at 36 million people) own 35.7% of national income estimated at US$s27bn (about
Shs97trn). This means that 3.6million Ugandans own over Shs34trn of Uganda’s GDP.

The report adds that another 10% (3.6m Ugandans) of Uganda’s population composed of the
poorest only won 2.5% (about Shs2.4trn) of the country’s national income.

Although the number of Ugandans living below the poverty line has declined to 19.7% in 2014,
down from 56% in 1992, the report notes that income inequality has instead increased. In fact,
these poverty figures were based on one dollar being enough for a person a day. However,
economists and analysts say, one dollar is no longer enough to cater for one’s daily needs. They
argue that for a person to live well a day, he or she needs over three dollars.

This means that poverty levels could actually be higher in Uganda than reported considering the
fact that the cost of living has gone up over time.
Despite Uganda’s economy growing at an average of 6% since 2002, the report reveals that the
percentage share of the national income between the richest and the poorest has been increasing
and decreasing respectively.

Why Rich Get Richer

“Inequality cuts across generations. The children of wealthier people have access to greater
opportunities and will themselves be richer,”

The Oxfam report also strongly points at corruption as a big factor in Uganda’s rising income
inequality.
Therefore there is much need for government to fight corruption in order to reduce income
inequality and its associated hazards

1.3 Objectives of the research

1.3.1 Main objective

This report provides a first step into understanding more clearly how rising income inequalities
might affect Uganda society and establish widely accepted knowledge that inequality is a toxic
element in Uganda society and suggest measures to policy makers to tack le them.

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1.3.2 Specific objectives

Aim of this report is to look into sound empirical studies , based on multivariate analysis which
examine the effect of income inequality on important social outcomes related to

(i) well-being
(ii) criminality
(iii) health
(iv) education
(v) political participation

1.3.2 Significance and scope of the study

Fundamentally, the relevance of this study is based on the fact that it aims to observe the impact
of income inequality on the people of Uganda . By carrying out various econometric analysis,
we shall be able to establish the extent to which the factors are inter-related.

From a theoretical perspective, this study will contribute to the plethora of knowledge and
already existing literature in the area of economic growth and income inequality. It would be an
important addition to the pool of scholarly and academic articles in this field.

Another significance of this study is that it offers probable recommendations and policy
measures to government, policy makers and NGO’s based on the findings of the research that
would be essential in ensuring the reduction of income inequality in Uganda and Africa at large.
Finally, the study will also fill in the gaps in the existing literature in the field.

2.7 Justification/Rationale

Inequality is bad for everyone whether rich or poor ,it continue to be a barrier for economic
development in developing countries .therefore there is need for quick and well investigated
action in order to stop the widening of income inequality.

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 CHAPTER 2

LITERATURE REVIEW

In according to Adam Smith (1776) in his book the wealth of nations, “no society can surely be
flourishing and happy, of which the far greater part of the members are poor and miserable”.
Oxfam (2016) suggested that 62 of the richest people have the same wealth as the 3.6 billion
poorest people. The rich continue to accumulate wealth, while the poor struggle for basic
necessities like food, access to clean water and shelter.

This chapter highlights the key concepts and notions which underlie the subject matter of the
study in order to provide an ideal framework for understanding the relationship between income
inequality and other socio economic variables in Uganda. Specifically, it will help answer the
proposed research questions and address previous empirical studies carried out by other
researchers in this field and identify gaps in the existing literature.

2.1 Concepts and definitions

In more detail, the literature review has highlighted the following elements:

1) The effect of income inequality on happiness critically depends on the perceived mobility in a
country. If income mobility is high, such as in the developed countries, income inequality tends
to be positively associated with reported well-being as individuals tend to consider that they will
eventually reach a higher income. The opposite is observed in low mobile countries because in
those countries individuals feel that it is impossible to reach a higher level of income.

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2) The majority of the studies focusing on the relationship between the income distribution and
criminality conclude that there is a strong positive relationship between income inequality and
criminality .The rationale behind these findings might be based on economic considerations –
income inequality increases the gain derived from a criminal act –and/or on a sentiment of
frustration of the less well-off individuals when they compare their situation with respect to the
wealthier ones.

3) Empirical analyses of the harmful effect of income inequality on health are usually not
conclusive on the other researches done by previous scholars , . This goes in line with the fact
that there is still not a widely accepted rationale for explaining why income inequality should
impact on health. Furthermore, several scholars tend to suggest that the causality runs in the
other way, from health status to income inequality but from our research it is greatly shows how
income inequality positively affect health.

4) The relationship between income inequality and educational attainment is highly significant
where the poor majority are likely not to attain the high institutional of learning than the rich
people

5) The relationship between turnout and inequality is likely to be mutually reinforcing because,
according to the class-bias assumption, the benefits from voting are lower for the low-income
group, reducing the incentive for this fringe of the population to vote. If voter turnout is skewed
by income, the policies implemented with favor the well-off group (median voter hypothesis),
thus participating to the intensification of income disparities. In turn, rising economic inequality
will discourage participation among low-income groups, and so on. These predictions are
confirmed by the majority of cross-country and single-country based studies.

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