While poverty measures focus on those living below the poverty line, inequality measures look at the welfare distribution of an entire population, poor and non-poor.

The Gini coefficient is one of the most commonly used measures of inequality and varies between 0 (when everyone has the same expenditure or income) and 1 (when one person has everything). Thus, a higher Gini coefficient implies more inequality. For most developing countries, Gini coefficients range between 0.3 and 0.6. According to our small-area estimation analysis, the national Gini coefficient is 0.33, indicating a relatively low degree of inequality in per capita expenditure. As expected, the Gini coefficient for rural areas is 0.29, slightly lower than that of urban areas, which is 0.31.

Like other measures of inequality, the Gini coefficient tends to be smaller for smaller areas, such as provinces or districts, than for the nation as a whole. This is because households in smaller areas are likely to be more similar to each other than to households across the entire country. This map shows the level of inequality in per capita expenditure as measured by the Gini coefficient at the district level. The areas with the least inequality (shaded in the lightest red) include highland areas in Attapeu, Luangprabang and Xiengkhuang provinces, while the highest levels of expenditure inequalities are found in districts that include both provincial or district towns, as well as in the surrounding rural areas; the comparatively high levels of inequalities in those districts are therefore largely a reflection of the urban-rural welfare differences seen in the village level maps of poverty incidence (Map I.1) and average per capita expenditure (Map I.4). Apart from this, inequality is relatively high in the upland districts of Khamkeut and Viengthong in Borikhamxay province, as well as in the Kalum district of Sekong province.

It is not surprising that there is a welfare gap between urban areas and the surrounding rural villages because urban areas have some of the richest households in the country, besides recent immigrants and others whose income is barely higher than that in rural areas. However, the reasons for the comparatively high inequalities in the upland areas of Borikhamxay and Sekong provinces are less obvious. The ethnical mix of villages may yield reasons for the higher inequalities. While the population of the two districts of Borikhamxay province is ethnically rather heterogeneous with most villages being ethnically mixed (Map F.4), the villages in the

Kalum district of Sekong province are ethnically rather homogenous, and the majority of the district’s population is from a single ethno-linguistic group (Map F.4). As can be seen in the village poverty map (Map I.1) these areas have a few villages with unusually high poverty rates, as well as a couple of villages with rather low poverty rates.

It is also interesting to note that many of the better-off rural areas have rather low levels of inequality. Although these areas tend to be characterised by intensive irrigated agriculture with a large percentage of the population depending on agriculture, and since the agricultural potential of the irrigated farm land is relatively uniform, one could also have expected that the wider commercial opportunities (particularly those related to the proximity to the Thai border) would result in greater inequalities among the population there. The fact that this appears not to be the case implies that the majority of the population manages to benefit rather equally from the opportunities presented.