# **3.4 The Top and Bottom of the Income and Wealth Distributions and Their Respective Welfare**

Here, we closely explore the top and bottom of the income and wealth distributions. In Table 6 we use the entire country data, combining rural and urban areas, to compare the concentration of income and wealth in SSA with rich and emerging economies as reported by Piketty (2014). In both the United States and in Malawi, the top 1% of the income distribution earns 20% of the total income. In Uganda, the concentration is even higher at 31% of total income, by far the highest concentration of income in all countries reported. In Tanzania, the top 1% earns 15% of total income, the same as in Britain, and similar to the average of emerging countries. If we consider the top 10%, it becomes clear that income is at least as concentrated in SSA as in the US; the top 10% in the United States earn 48% of total income. In Malawi, the top 10% earn 50% of total income, in Tanzania 51%, and in Uganda 65%. It is not the case, however, that higher income inequality translates to higher wealth inequality than in the United States. The top 10% of the wealthiest households in Tanzania and Uganda hold 72% and 69%, respectively, of the total wealth, a similar number to the United States, 71%. In Malawi, wealth concentration is lower; the top 10% holds no more than 57% of total wealth, a concentration lower than Sweden’s.

We now take a closer look at the entire distribution of income separately for rural and urban Malawi in Table 7, panels A1 and B1. Those panels show the share of total CIW ranked by household income. In rural Malawi, the top 10% of the income distribution earns 43% of total rural income. In urban areas, the top 10% earns 62% of total urban income. The top 1% of the income distribution earns 14% and 25% of total income, respectively, in rural and urban areas. On the other end of the distribution, the bottom 20% in rural areas earns 3% of total rural income and the bottom 20% in urban areas earns 2% of total urban income. In urban Malawi, the income gap between the rich and poor is very similar to that of the United States in 2010, where the top 1% of the income distribution earns 21% of total income and the bottom 20% earns 3% of total income (D ́ıaz-Gim ́enez et al. (2011)).

In terms of wealth, we find that the top 10% of the wealth distribution holds 49% of total wealth in rural Malawi and 73% in urban areas (see, respectively, panels A2 and B2 in Table 7). Further, the top 1% of the wealth distribution holds 17% and 32% of total wealth in rural and urban areas, respectively. Strikingly similar to urban Malawi, the top 10% and top 1% of the wealth distribution in the US holds, respectively, 71% and 34% of total wealth (see D ́ıaz-Gim ́enez et al. (2011)).<sup>48</sup> However, the current concentration of wealth at the top of the distribution in

> 48In Tanzania, in terms of income, the top 10% and top 1% rich in rural (urban) areas earn, respectively, 50% (41%) and 14% (18%), and 62% (66%) and 27% (26%) in Uganda. In terms of wealth, the top 10% and top 1% rich in rural (urban) areas hold, respectively, 67% (90%) and 20% (44%) in Tanzania, and 67% (70%) and

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