How inequality declined in Mongolia: A detailed income source analysis

Abstract Between 2002 and 2024, Mongolia's income inequality decreased substantially. Structural economic shifts, labor market changes, and evolving income composition drive this reduction. Using income source decomposition on household survey data, this study finds that the reduced shares of self‐employment and agricultural income were the main equalizing channel. In contrast, rising wage shares exerted upward pressure on inequality despite declining wage concentration. The expansion of employment in the mining, trade, and finance sectors, along with broad coverage of social welfare programs, especially child benefits, played a significant role. Pandemic‐era transfers intensified the impact of social transfers. However, regional disparities and vulnerability of herder households persist. The results highlight the importance of targeted labor market policies, improved social transfer design, and resilience measures for rural livelihoods in resource‐dependent developing economies.