country differences across Malawi, Tanzania, and Uganda.<sup>38</sup> While the differences in the level of CIW between rural and urban areas are perhaps well understood, whether distributional differences exist across rural and areas is a lesser-understood phenomenon. We find that inequality is higher in urban areas than in rural areas (see Table 3). This is true for the triplet of CIW in all three countries.

Focusing on consumption, we find that the log variance in rural areas is 0.49 in both Malawi and Tanzania, which is lower than their respective variances 0.59 and 0.60 in urban areas. That is, consumption is more unequal in urban areas than in rural areas, by roughly a factor of 1.20 for Malawi and Tanzania. The similarity between the shape of the entire distribution of consumption in Malawi and Tanzania can also be seen in Figure 2. In Uganda, consumption inequality is roughly 70% larger than in Malawi and Tanzania in both rural and urban areas.<sup>39</sup> Hence, as in Malawi and Tanzania, urban consumption inequality in Uganda is roughly 1.26 times larger than in its rural areas.

The variance of logged income varies across all three countries; Malawi has the lowest inequality (rural: 0.99 and urban: 1.60), following by Tanzania (1.44 and 1.90) and Uganda (1.67 and 2.01). Income is also more unequal in urban areas than in rural areas, by a factor of 1.6 for Malawi (i.e., a larger factorial rural-urban difference in log variances than that of consumption inequality, 1.2). Further, the inequality of income is larger than that of consumption in both rural and urban areas, indicating a substantial degree of partial insurance. Precisely, the log variance of consumption is between 32% and 50% of the log variance of income across countries and residency areas.

Finally, wealth inequality is larger than income and, hence, consumption inequality. This can also be observed in Figure 2; the densities for wealth are flatter than for consumption and income.

> 38In more detail, urban Malawi and Tanzania have virtually identical per capita consumption — respectively, US$648 and US$641 — and very similar income — respectively, US$618 and US$578. Neither comparison is statistically different. Moreover, the composition of income and consumption is also very similar (see Table 2). In rural areas, agricultural income represents more than 50% of total income, followed by labor and then business. In urban areas, labor represents more than 50% of total income followed by business and agriculture. In contrast, Uganda is relatively different from Malawi and Tanzania. Even though the estimated income per capita in rural areas is very similar across all three countries, the main source of income in rural Uganda is business, not agriculture. Business, instead of labor, is also the dominant source of income in urban areas. The difference in urban consumption is even more striking: Uganda’s urban per capita consumption is around two-thirds higher than Malawi’s and Tanzania’s. Moreover, consumption of durables in Uganda is relatively more important than in the other two countries. According to the household survey data, Uganda as a whole is clearly richer on average than the other two countries, and this difference is related to relative higher business income and more durable consumption in urban Uganda.

> 39The higher consumption inequality in Uganda than in Malawi and Tanzania is largely driven by the share of durable consumption, see Table 2. See also Table B-5 in the online appendix.

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