Changing Sources of Household Income, Poverty, and Sectoral Inequality in Sri Lanka, 1990–2006


  • The authors would like to thank the Department of Census and Statistics Office of Sri Lanka for providing the data set and Masako Kurosawa, Chikako Yamauchi, Nobuhiko Fuwa, and Tatsuo Oyama for their invaluable comments on the early draft of the paper. The usual caveat applies.


Comparing dynamic changes in household income and poverty among urban, rural, and estate sectors in Sri Lanka from 1990 to 2006, this study finds that a shift of household income away from farm to nonfarm sources is accompanied by a significant improvement in household income and reduction in poverty, particularly in the rural sector. Major contributing factors are the rise in returns to labor, in general, and educated labor, in particular, due to the development of the nonfarm labor market. Persistently low income among estate households can be explained primarily by the limited availability of nonfarm employment opportunities and the low education levels of working members.