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Abstract
The present study tries to assess the effect of income sources on the inequality among rural households of the North-east Indian states using large household-level data. The results indicate that as income level increases, farm households tend to shift from less remunerative economic activities, i.e., crop production towards higher value ones, i.e., non-farm business activities. Agriculture contributes highest to the income inequality in the region but has an inequality decreasing effect. The distribution of wages and salaries, livestock income and non-farm business income has an un-equalising effect on income distribution. Theil index estimates showed that intra-state, intra-district and intra-landholding size inequality is the main contributor to total inequality in the region.