Income inequality, economic growth, and political instability in sub-Saharan Africa

2003 ◽  
Vol 41 (4) ◽  
pp. 611-639 ◽  
Author(s):  
Philip Nel
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Risk Perceptions ◽  
Political Instability ◽  
Negative Relationship ◽  
Ordinary Least Squares ◽  
Sub Saharan Africa ◽  
Reduced Form ◽  
Growth Prospects ◽  
Sub Saharan

There is much disagreement about the effect that income distribution has on economic growth. This study uses high-quality household-expenditure-based data to estimate this effect for a sample of sub-Saharan African states. It uses an ordinary least squares (OLS) technique to estimate the effects of income inequality in a standard reduced-form growth regression for a set of cross-section data for the period 1986–97. It finds that higher levels of inequality seem to impinge negatively on growth prospects over the medium term, but that this effect is weak and that the finding of a negative relationship is not robust. It then tests whether this negative consequence of inequality for growth is attributable to inequality's effect on political instability, as the literature suggests. The evidence indicates that high levels of inequality do not affect political instability in any statistically significant manner for the countries in the sample, but that they do negatively affect the risk perceptions of potential investors, and so may contribute to lower growth prospects.

scholarly journals Financial Inclusion, Income Inequality and Sustainable Economic Growth in Sub-Saharan African Countries

2021 ◽  
Vol 13 (4) ◽  
pp. 1780
Author(s):  
Chima M. Menyelim ◽  
Abiola A. Babajide ◽  
Alexander E. Omankhanlen ◽  
Benjamin I. Ehikioya
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Financial Services ◽  
Sub Saharan Africa ◽  
Kuznets Curve ◽  
African Countries ◽  
Financial Access ◽  
Sub Saharan ◽  
Sustainable Economic Growth ◽  
The Impact

This study evaluates the relevance of inclusive financial access in moderating the effect of income inequality on economic growth in 48 countries in Sub-Saharan Africa (SSA) for the period 1995 to 2017. The findings using the Generalised Method of Moments (sys-GMM) technique show that inclusive financial access contributes to reducing inequality in the short run, contrary to the Kuznets curve. The result reveals a negative effect of financial access on the relationship between income inequality and economic growth. There is a positive net effect of inclusive financial access in moderating the impact of income inequality on economic growth. Given the need to achieve the Sustainable Development Targets in the sub-region, policymakers and other stakeholders of the economy must design policies and programmes that would enhance access to financial services as an essential mechanism to reduce income disparity and enhance sustainable economic growth.

scholarly journals The problem of economic growth in Sub-Saharan Africa

2020 ◽  
Author(s):  
Senanu Kwasi Klutse
Keyword(s):  
Economic Growth ◽  
Negative Relationship ◽  
Sustainable Growth ◽  
Sub Saharan Africa ◽  
Gdp Per Capita ◽  
Savings Rate ◽  
Wide Range ◽  
Per Capita ◽  
Sub Saharan ◽  
Determinants Of Economic Growth

A wide range of policy-related variables have a persistent influence on economic growth. This has consistently maintained the interest of economists on the determinants of economic growth over the years. There is consensus however that for countries to grow sustainably, a lot of stall must be placed on higher savings rate as this makes it easy for such countries to grow faster because they endogenously allocate more resources to inventive activities. Due to data difficulties in Sub-Saharan Africa (SSA) it is nearly impossible for one to consider important variables such as accumulation of knowledge and human capital when analysing growth sustainability. Studying four lower middle-income countries in SSA – Ghana, Republic of Congo, Kenya and Lesotho – this study tests the hypothesis of sustainable growth by using a Dynamic Ordinary Least Square (DOLS) model to examine the relationship between savings, investment, budget deficit and the growth variable. The results showed that savings had a significant but negative relationship with the GDP per capita (PPP). A Granger Causality test conducted showed that savings does not granger cause GDP per capita (PPP), the HDI index, deficit and investment. This leads to the conclusion that growth in these countries are not sustainable. The study recommends that policy makers focus on the savings variable if these countries will want to achieve sustainable growth.

scholarly journals Generalized Trust and Economic Growth: The Nexus in MENA Countries

Economies ◽  
2021 ◽  
Vol 9 (1) ◽  
pp. 39
Author(s):  
Rania S. Miniesy ◽  
Mariam AbdelKarim
Keyword(s):  
Economic Growth ◽  
Social Trust ◽  
Multiple Linear Regression Model ◽  
Ordinary Least Squares ◽  
Sub Saharan Africa ◽  
Mena Region ◽  
Mena Countries ◽  
Interaction Terms ◽  
Sub Saharan ◽  
Substantial Decline

This study mainly examines the relationship between generalized/horizontal/social trust and economic growth in countries in the Middle East and North Africa (MENA) region, considering the substantial decline in their trust values since 2005. The study utilizes a multiple linear regression model based on panel data comprising 104 countries over the period from 1999 to 2020. Trust data were obtained from the last four waves of the World Values Survey (WVS). A Pooled Ordinary Least Squares (POLS) estimation technique was used, and interaction terms between trust and several dummy variables were employed. The results show an overall positive and significant relationship between trust and economic growth in the general model and for all country classifications, except for MENA, where the overall relationship is negative but almost negligible. Trust has the highest impact on growth in transition economies, followed in order by developing Asia, developed, developing/Sub-Saharan Africa, developing America, and then MENA countries. Further investigations reveal that the overall negative/reversed effect of trust on economic growth in MENA is only during waves 6 and 7, where the coefficients are sizable.

scholarly journals Growth effect of income inequality in sub-Saharan Africa: exploring the transmission channels

2020 ◽  
Vol 56 (2) ◽  
pp. 176-190
Author(s):  
Ibrahim Abidemi Odusanya ◽  
Anthony Enisan Akinlo
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Generalized Method Of Moments ◽  
Sub Saharan Africa ◽  
Growth Effect ◽  
Credit Market Imperfection ◽  
Negative Effect ◽  
Sub Saharan ◽  
Positive Effect ◽  
Ssa Countries

AbstractSub-Saharan Africa (SSA) ranks as the second most unequal region globally (in terms of income distribution), harboring 10 of the 19 most unequal countries in the world. This paper explores the channels through which income inequality exerts its effects on economic growth in SSA. The study spans the period 1995–2015, focusing on 31 SSA countries. Findings from the two-step system generalized method of moments suggest that income inequality exerts a significant positive effect on economic growth via the saving transmission channel, while it has a statistically significant negative effect on economic growth in the region through the channels of fertility, credit market imperfection, and fiscal policy.

scholarly journals Investigating into the Employment and Income Inequality Nexus in Sub-Saharan Africa

2021 ◽  
Author(s):  
Suneila Gokhool ◽  
Verena Tandrayen Ragoobur ◽  
Harshana Kasseeah
Keyword(s):  
Income Inequality ◽  
Low Income ◽  
Good Governance ◽  
Ordinary Least Squares ◽  
Development Stage ◽  
Sub Saharan Africa ◽  
Domestic Investment ◽  
African Countries ◽  
Middle Income ◽  
Sub Saharan

Abstract This paper aims to examine the relationship between employment and income inequality in Sub-Saharan African countries. Even though the region has experienced a decade of positive economic growth, it has the second highest level of income inequality in the world. The drivers of income inequality are quantitatively investigated using data from 1991 to 2015 by the Fully Modified Ordinary Least Squares technique. The results show that employment, trade and domestic investment reduce income inequality in the region in the long term. Higher trade tends to improve income equality in middle-income countries. Alternatively, domestic investment and trade have more potential to reduce inequality in low-income economies. Controlling corruption is essential in the long run for job creation, irrespective of the development stage of the country. There is thus evidence to show that policies must be oriented to more opportunities of employment, domestic investment, trade and good governance in terms of low corruption.

scholarly journals Modelling the financial intermediation function of banks and economic growth in sub-Saharan Africa

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ibrahim Nandom Yakubu ◽  
Iliasu Abdallah
Keyword(s):  
Economic Growth ◽  
Private Sector ◽  
Money Supply ◽  
Financial Intermediation ◽  
Negative Relationship ◽  
Sub Saharan Africa ◽  
Bank Credit ◽  
Content Type ◽  
Bank Deposits ◽  
Sub Saharan

PurposeThe purpose of this study is to investigate the effect of financial intermediation functions of banks on economic growth in sub-Saharan Africa.Design/methodology/approachThe study employs data from 11 sub-Saharan African countries over the period 1970–2016. Using broad money supply, bank credit to the private sector and bank deposits as financial intermediation measures, the authors apply the random effects (RE) technique based on the recommendation of the Breusch–Pagan test.FindingsThe results show that except for bank deposits, broad money supply and bank credit to the private sector significantly influence economic growth. While broad money has a negative relationship with growth, bank credit to the private sector and bank deposits are positively correlated with economic growth.Originality/valueThe relationship between financial intermediation and economic growth remains unsettled, as results vary across countries. Besides, in developing countries' perspective, extant studies are largely focused on individual countries to investigate the financial intermediation-growth nexus. In this study, the authors take a different direction by employing a panel approach and thus adding to the few cross-country studies on the subject matter. Also, unlike other studies that have focused on a single indicator of financial intermediation, this study uses three indicators of financial intermediation which broadly reflect the intermediation functions of banks.

scholarly journals ECONOMIC GROWTH AND INCOME INEQUALITY IN SUB-SAHARAN AFRICA

2020 ◽  
Vol 14 (1) ◽  
pp. 113-129
Author(s):  
S. O. AKINBODE ◽  
T. M. BOLARINWA ◽  
O. O. HASSAN
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Granger Causality ◽  
Sub Saharan Africa ◽  
African Countries ◽  
Causality Test ◽  
Distributed Lag ◽  
Long Run ◽  
Negative Effect ◽  
Sub Saharan

Economies of Sub-Saharan African (SSA) countries have been growing slowly in recent time. Economic growth is thought to affect inequality but not much is known about the nature of such relationship in SSA and there is no concordance among the few available. This paper examined the relationship between economic growth and inequality in the region using data from 1990 to 2017estimated with the Panel Autoregressive Distributed Lag (ARDL) Model and Granger Causality. Hausman’s test suggested the superiority of the Pooled Mean Group (PMG) over the Mean Group (MG) Model. The PMG results showed that economic growth had significant and negative effect on income inequality (proxy by GINI-coefficient) in the long run suggesting a state of the later part of the Kuznet curve. This is in addition to the negative effect in the short run which is contrary to the theory. Furthermore, the result of the Granger Causality test revealed evidence of unidirectional relationship running from economic growth to income inequality in the region. Therefore, the study recommended that governments of Sub-Saharan African countries should implement policies and programmes capable of sustaining and improving inclusive growth in order to avoid high income inequality in the region.      

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