This paper uses data from the Malaysian Family Life Survey to examine the sensitivity of urban/rural income differentials to the definition and measurement of income. Measured income differentials vary with the extent to which nonmarket activities are included in the scope of income; with how the distribution of income is summarized; and by whether one adjusts for differences in hours of work, household size and composition, ethnic composition, and other sociodemographic characteristics. For example, depending on the measure chosen, estimates of the amount by which urban income exceeds rural income in Malaysia range from 9 percent to 141 percent. Although for many measures of income, urban incomes are about twice the size of rural incomes, most of the overall inequality in Peninsular Malaysia is due to differences within locational strata groups rather than between them.
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