The study sought to decompose income inequality across various household income components
and to estimate the marginal effects of changes in income components on overall income
inequality in Ghana. A Gini decomposition procedure was applied to the fifth and sixth rounds of
the Ghana Living Standards Surveys. The results suggest that, in general, income inequality has
increased marginally over the years (Gini coefficient of 0.66 in 2013 and 0.62 in 2006).
Inequality was however higher in urban areas than in rural areas in 2013 with a reverse situation
observed in 2006. The income component analysis suggest that wage employment income
dominated household income in both rural and urban areas, even though the magnitude was
higher in urban areas. Farm income was only dominant in rural communities in 2006. Selfemployment
and remittance income had consistent equalizing effects on total household income
distribution. The findings suggest that directing poverty reduction strategies towards specific
income components will be crucial for effective pro-poor income distribution.