This paper investigates how two effects drive wedges between nominal and real
inequality estimates. The effects are caused by (i) differences in the composition of consumption
over the income distribution coupled with differential inflation of consumption items; and (ii)
quantity discounting effects for the non-poor. Household-specific deflators are estimated using
15 surveys collected in six countries in the period 1999–2011. In some countries (Mozambique,
Tanzania, Malawi, and Pakistan), nominal inequality is lower than real inequality. In other
countries (Ethiopia and Madagascar), no differences are found. Finally, I argue that poverty
estimation based on national account consumption means and estimates of inequality from
consumption surveys should employ real, rather than nominal, inequality estimates. This
increases the level and reduces the decline of poverty over time, but the magnitude of the
adjustment is country- and year-specific.