Does foreign aid help alleviate income inequality? New evidence from African countries

2019 ◽  
Vol 46 (4) ◽  
pp. 549-561
Author(s):  
Moheddine Younsi ◽  
Hasna Khemili ◽  
Marwa Bechtini
Keyword(s):  
Income Inequality ◽  
Foreign Aid ◽  
Trade Openness ◽  
African Countries ◽  
Critical Question ◽  
System Gmm ◽  
Content Type ◽  
Dynamic Panel Model ◽  
Time Period ◽  
The Relationship

Purpose The purpose of this paper is to examine the relationship between foreign aid and income inequality (IIQ) reduction for 16 African countries using unbalanced panel data covering the period 1990–2011. This paper attempts to answer the critical question: does foreign aid lead to IIQ reduction? Design/methodology/approach To examine the effect of foreign aid on IIQ, this paper uses an RE model with robust OLS regression and system-GMM estimator, which are useful in dealing with the endogeneity problems. Findings Results of RE model indicate that foreign aid, foreign direct investment, trade openness as well as corruption have a positive and statistically significant effect on IIQ. Government spending and inflation have a negative and statistically significant effect on IIQ, while GDP per capita growth has a negative but statistically insignificant relationship with IIQ. The results are robust by using system-GMM dynamic panel model which confirms that the coefficients of all considered variables remain same sign and significance. Research limitations/implications This study implies that an increase in foreign aid is associated with an increase in IIQ. As an effective strategy to foreign aid, this paper suggests that improving of financial sector development, and institutional quality and policies can reduce income inequalities and stimulate economic growth. Originality/value This paper is the first of its kind to empirically explore the relationship between IIQ and foreign aid measured here by net aid transfers as a share of GDP in African countries, using modern econometric techniques, time period and a variety of control variables.

Financial development and income inequality in India: an application of ARDL approach

2015 ◽  
Vol 42 (1) ◽  
pp. 64-81 ◽  
Author(s):  
Madhu Sehrawat ◽  
A K Giri
Keyword(s):  
Income Inequality ◽  
Financial Development ◽  
Trade Openness ◽  
Development Economic ◽  
Annual Data ◽  
Content Type ◽  
Long Run ◽  
Integration Test ◽  
Short Run ◽  
The Relationship

Purpose – The purpose of this paper is to examine the relationship between financial development and income inequality in India using annual data from 1982-2012. Design/methodology/approach – Stationarity properties of the series are checked by using ADF, DF-GLS, KPSS and Ng- Perron unit root tests. The paper applied the auto regressive distributed lag (ARDL) bound testing approach to co-integration to examine the existence of long run relationship; and error correction mechanism for the short run dynamics. Findings – The co-integration test confirms a long run relationship between financial development and income inequality for India. The ARDL test results suggest that financial development, economic growth, inflation aggravates the income inequality in both long run and short run. However, trade openness reduces the gap between rich and poor in India. Research limitations/implications – The present recommend for appropriate economic and financial reforms focussing on financial inclusion to reduce income inequality in India. Originality/value – Till date, there is hardly any study that makes a clear comparison between market-based indicator and bank based indicator of financial development in India and those examining the relationship between finance and income inequality nexus. Further there is hardly any study to include gini coefficient as a proxy for inequality for India and apply ARDL techniques of co-integration, using the basic principles of GJ hypothesis and provide short run and long run dynamics for India. So the contribution of the paper is to fill these research gaps.

scholarly journals Creating relationship continuity across projects in the construction industry

IMP Journal ◽  
2017 ◽  
Vol 11 (2) ◽  
pp. 207-229 ◽  
Author(s):  
Malena Ingemansson Havenvid ◽  
Elsebeth Holmen ◽  
Åse Linné ◽  
Ann-Charlott Pedersen
Keyword(s):  
Construction Industry ◽  
Empirical Studies ◽  
Mutual Orientation ◽  
Content Type ◽  
Construction Firms ◽  
Relationship Continuity ◽  
Time Period ◽  
Strategy Types ◽  
The Relationship ◽  
Over Time

Purpose The purpose of this paper is to investigate the relationship continuity across projects among actors in the construction industry, and to discuss why and how such continuity takes place. Design/methodology/approach The authors draw on the results from four in-depth case studies illustrating different strategies for pursuing relationship continuity. The results are analysed and discussed in light of the oft-mentioned strategies suggested by Mintzberg (1987): emergent, deliberate and deliberately emergent strategies. Furthermore, the ARA-model is used to discuss why the relationship continuity strategies are pursued, and which factors might enable and constrain the relationship continuity. Findings The main findings are twofold. First, the authors found that the strategy applied for pursuing relationship continuity may, in one-time period, contain one type of strategy or a mix of strategy types. Second, the type of strategy may evolve over time, from one type of strategy being more pronounced in one period, to other strategies being more pronounced in later periods. The strategies applied by construction firms and their counterparts can thus contain elements of emergent, deliberate and deliberately emergent strategies, in varying degrees over time. It is also shown that the strategies of the involved actors co-evolve as a result of interaction. Also, the main reasons for pursuing continuity appear to lie in the re-use and development of important resources and activities across projects to create efficiency and the possibility to develop mutual orientation, commitment and trust over time, and thus reduce uncertainty. Research limitations/implications Further empirical studies are needed to support the findings. For managers, the main implication is that relationship continuity can arise as part of an emerging interaction pattern between firms or as part of a planned strategy, but that elements of both might be needed to sustain it. Originality/value The authors combine Mintzberg’s strategy concepts with the ARA-model to bring new light to the widely debated issue of discontinuity and fragmentation in the construction industry.

Banking technology and cashless economy in selected Sub-Saharan African countries: does education matter?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ese Urhie ◽  
Ogechi Chiagozie Amonu ◽  
Chiderah Mbah ◽  
Olabanji Olukayode Ewetan ◽  
Oluwatoyin Augustina Matthew ◽  
...  
Keyword(s):  
Panel Study ◽  
Positive Sign ◽  
African Countries ◽  
Content Type ◽  
Bank Branches ◽  
Mobile Cellular ◽  
Sub Saharan ◽  
The Relationship ◽  
Ssa Countries ◽  
Practical Implications

Purpose This study aims to analyze the effect of banking technology [automated teller machine (ATM) and mobile cellular devices (MOBs)] and other traditional factors on the level of currency in circulation for a sample of 21 selected sub-Saharan African (SSA) countries. It also assessed the mitigating effect of education on the relationship between banking technology and the cashless economy. Design/methodology/approach The study used a panel data approach to design a cashless economy model with banking technology – ATM and MOBs – as well as their interaction with education as regressors. Findings This study finds that MOB is significant for promoting a cashless economy, whereas ATM is insignificant in sample SSA countries. The level of education and the number of bank branches were also found to be significant in promoting a cashless economy. The interaction between education and ATM was insignificant but negatively signed, whereas that between education and MOB was significant but had a positive sign. Research limitations/implications Non-availability of data restricted this work to a panel study of selected SSA countries. Subsequent studies should consider single-country case studies. Practical implications Findings from the study imply that for banking technology to drive a cashless economy effectively, education has to be improved. Originality/value The ratio of cash in circulation to total money supply was used as a measure of the cashless economy. The study also evaluated the moderating effect of education on banking technology.

Connecting the poor: the internet, mobile phones and financial inclusion in Africa

2018 ◽  
Vol 20 (6) ◽  
pp. 568-581 ◽  
Author(s):  
Olaniyi Evans
Keyword(s):  
Mobile Phones ◽  
Empirical Studies ◽  
Financial Inclusion ◽  
The Internet ◽  
African Countries ◽  
Macroeconomic Factors ◽  
Content Type ◽  
Developed Economies ◽  
Causality Tests ◽  
The Relationship

Purpose The increased adoption of internet-enabled phones in Africa has caused much speculation and optimism concerning its effects on financial inclusion. Policymakers, the media and various studies have all flaunted the potentials of internet and mobile phones for financial inclusion. An important question therefore is “Can the internet and mobile phones spur the inclusion of the financially excluded poor? This study therefore aims to examine the relationship and causality between internet, mobile phones and financial inclusion in Africa for the 2000-2016 period. Design/methodology/approach The empirical analysis followed these three steps: examination of the stationarity of the variables; testing for the cointegration; and evaluation of the effects of the internet and mobile phones on financial inclusion in Africa for the 2000-2016 period using three outcomes of panel FMOLS approach and Granger causality tests. Findings The empirical evidence shows that internet and mobile phones have significant positive relationship with financial inclusion, meaning that rising levels of internet and mobile phones are associated with increased financial inclusion. There is also uni-directional causality from internet and mobile phones to financial inclusion, implying that internet and mobile phones cause financial inclusion. The study also shows that macroeconomic factors such as capital formation, primary enrollment, bank credit, broad money, population growth, remittances, agriculture and interest rate, as well as institutional factors such as regulatory quality are important underlying factors for financial inclusion in Africa. Originality/value In the literature, there is a dearth of research on the internet, mobile phones and financial inclusion, especially in Africa. Most of the related studies are conceptual and micro-based, with little empirical attention to the relationship and causality between internet, mobile phones and financial inclusion. In fact, this dearth of rigorous empirical studies has been attributed as the main cause of inadequate policy guidance in enhancing information communication technologies (Roycroft and Anantho, 2003), despite saturation levels in developed economies. This study fills the gap by evaluating the effects of the Internet and mobile phones on financial inclusion for 44 African countries for the 2000-2016 period.

The impacts of sector growth and monetary policy on income inequality in developing countries

2019 ◽  
Vol 46 (3) ◽  
pp. 591-610 ◽  
Author(s):  
Sima Siami-Namini ◽  
Darren Hudson
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Monetary Policy ◽  
Panel Data ◽  
Income Inequality ◽  
Nonlinear Effect ◽  
Service Sector ◽  
Functional Form ◽  
Content Type ◽  
The Relationship

PurposeThe purpose of this paper is to explore the effect of growth in different sectors of the economy of developing countries on income inequality and analyze how inflation, as a proxy for monetary policy, makes a proportionate contribution for setting a binding national target for reducing income inequality. The paper examines the existence of a linear or nonlinear effect of inflation and sectoral economic growth on income inequality using a balanced panel data of 92 developing countries for the period of 1990–2014.Design/methodology/approachMethods section includes several steps as below: first, the functional form of the model using panel data for investigating the contribution of economic sectors in income inequality; second, to estimate the relationship between income inequality and sector growth: testing the Kuznets hypothesis; third, to estimate the relationship between inflation and income inequality base on general functional form of the model proposed by Amornthum (2004); fourth, a panel Granger causality analysis based on a VECM approach.FindingsThe statistically significant finding shows that first agricultural growth and then industrial growth have a dominate impact in reducing income inequality in our sample. But, the service sector growth has positive effects. The results confirm the existence of Kuznets inverted “U” hypothesis for industry growth and Kuznets “U” hypothesis for service sector growth. The findings show that sector growth and inflation affect income inequality in the long-run.Originality/valueThis research is an original paper which analyzes the effect of growth in different sectors of the economy of developing countries (agriculture, manufacturing and services sectors) on income inequality and test the Kuznets hypothesis in terms of sector growth and at the same time, examine the existence of a linear/nonlinear effect of inflation and sectoral economic growth on income inequality and test Granger causality relationship between income inequality and sector growth and inflation.

scholarly journals The human capital–economic growth nexus in SSA countries: what can strengthen the relationship?

2020 ◽  
Vol 47 (9) ◽  
pp. 1143-1159
Author(s):  
Roseline Tapuwa Karambakuwa ◽  
Ronney Ncwadi ◽  
Andrew Phiri
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Least Squares ◽  
Ordinary Least Squares ◽  
African Countries ◽  
Content Type ◽  
Econometric Approach ◽  
The Impact ◽  
The Relationship ◽  
Ssa Countries

PurposeThe purpose of this study is to examine the impact of human capital on economic growth for a selected sample of nine SSA countries between 1980 and 2014 using a panel econometric approach.Design/methodology/approachThe authors estimate a log-linearized endogenous using the fully modified ordinary least squares (FMOLS) and the dynamic ordinary least squares (POLS) applied to our panel data time series.FindingsThe empirical analysis shows an insignificant effect of human capital on economic growth for our selected sample. These findings remain unchanged even after adding interactive terms to human capital, which are representatives of government spending as well as foreign direct investment. Nevertheless, the authors establish a positive and significant effect of the interactive term between urbanization and human capital on economic growth.Practical implicationsThe results emphasize the need for African policymakers to develop urbanized, “smart”, technologically driven cities within the SSA region as a platform toward strengthening the impact of human capital-economic growth relationship.Originality/valueThis study becomes the first in the literature to validate the human capital–urbanization–growth relationship for African countries.

scholarly journals Institutional benchmarking of foreign aid effectiveness in Africa

2015 ◽  
Vol 42 (6) ◽  
pp. 543-565 ◽  
Author(s):  
Simplice A. Asongu
Keyword(s):  
Foreign Aid ◽  
Development Assistance ◽  
Institutional Quality ◽  
Political Stability ◽  
Institutional Development ◽  
African Countries ◽  
Content Type ◽  
Institutional Dynamics ◽  
Government Quality ◽  
Institutional Benefits

Purpose – The purpose of this paper is to integrate two main strands of the aid-development nexus in assessing whether institutional thresholds matter in the effectiveness of foreign-aid on institutional development in 53 African countries over the period 1996-2010. Design/methodology/approach – The panel quantile regression technique enables us to investigate if the relationship between institutional dynamics and development assistance differs throughout the distributions of institutional dynamics. Eight government quality indicators are employed: rule of law, regulation quality, government effectiveness, corruption, voice and accountability, control of corruption, political stability and democracy. Findings – Three hypotheses are tested and the following findings are established: first, institutional benefits of foreign-aid are contingent on existing institutional levels in Africa; second, but for a thin exception (democracy), foreign-aid is more negatively correlated with countries of higher institutional quality than with those of lower quality; third, the institutional benefits of foreign-aid are not questionable until greater domestic institutional development has taken place. The reverse is true instead. government quality benefits of development assistance are questionable in African countries irrespective of prevailing institutional quality levels. Originality/value – This paper contributes to existing literature on the effectiveness of foreign-aid by focussing on the distribution of the dependent variables (institutional dynamics). It is likely that best and worst countries in terms of institutions respond differently to development assistance.

Harnessing foreign aid for the poor: role of institutional democracy

2020 ◽  
Vol 47 (7) ◽  
pp. 1689-1710
Author(s):  
Eric Akobeng
Keyword(s):  
Sustainable Development ◽  
Foreign Aid ◽  
Poverty Reduction ◽  
Gdp Per Capita ◽  
Land Area ◽  
Content Type ◽  
Per Capita ◽  
The Relationship ◽  
Ssa Countries

PurposeThis paper examines the relationship between foreign aid, institutional democracy and poverty. The paper explores the direct effect of foreign aid on poverty and quantifies the facilitating role of democracy in harnessing foreign aid for poverty reduction in Sub-Saharan Africa (SSA).Design/methodology/approachThe paper attempts to address the endogenous relationship between foreign aid and poverty by employing the two-stage least squares instrumental variable (2SLS-IV) estimator by using GDP per capita of the top five Organization for Economic Co-operation and Development (OECD) countries sending foreign aid to SSA countries scaled by the inverse of the land area of the SSA countries to stimulate an exogenous variation in foreign aid and its components. The initial level of democracy is interacted with the senders’ GDP per capita to also instrument for the interaction terms of democracy, foreign aid and its components.FindingsThe results suggest that foreign aid reduces poverty and different components of foreign aid have different effects on poverty. In particular, multilateral source and grant type seem to be more significant in reducing poverty than bilateral source and loan type. The study further reveals that democratic attributes of free expression, institutional constraints on the executive, guarantee of civil liberties to citizens and political participation reinforce the poverty-reducing effects of aggregate foreign aid and its components after controlling for mean household income, GDP per capita and inequality.Research limitations/implicationsThe methodological concern related to modeling the effects of foreign aid on poverty is endogeneity bias. To estimate the relationship between foreign aid, democracy and poverty in SSA, this paper relies on a 2SLS-IV estimator with GDP per capita of the top five aid-sending OECD countries scaled by the inverse of land area of the SSA countries as an external instrument for foreign aid. The use of the five top OECD's Development Assistance Committee (OECD-DAC) countries is due to the availability of foreign aid data for these countries. However, non-OECD-DAC countries such as China and South Africa may be important source of foreign aid to some SSA countries.Practical implicationsThe findings further suggest that the marginal effect of foreign aid in reducing poverty is increasing with the level of institutional democracy. In other words, foreign aid contributes more to poverty reduction in countries with democratic dispensation. This investigation has vital implications for future foreign aid policy, because it alerts policymakers that the effectiveness of foreign aid can be strengthened by considering the type and source of aid. Foreign aid and quality political institution may serve as an important mix toward the achievement of the Sustainable Development Goals 2030 and the Africa Union Agenda 2063.Social implicationsAs the global economy faces economic and social challenges, SSA may not be able to depend heavily on foreign partners to finance the region's budget. There is the need for African governments to also come out with innovative ways to mobilize own resources to develop and confront some of the economic challenges to achieve the required reduction in poverty. This is a vision that every country in Africa must work toward. Africa must think of new ways of generating wealth internally for development so as to complement foreign aid flows and also build strong foundation for welfare improvement, self-reliance and sustainable development.Originality/valueThis existing literature does not consider how democracy enhances the foreign aid and poverty relationship. The existing literature does not explore how democracy enhances grants, loans, multilateral and bilateral aid effectiveness in reducing poverty. This paper provides the first-hand evidence of how institutional democracy enhances the poverty-reducing effects of foreign aid and its components. The paper uses exogenous variation in foreign aid to quantify the direct effect of foreign aid and its components on poverty.

The great reanimation

2020 ◽  
Vol 41 (6) ◽  
pp. 81-84
Author(s):  
Peter Buell Hirsch
Keyword(s):  
Income Inequality ◽  
Design Methodology ◽  
Labor Movements ◽  
Tipping Points ◽  
Political Will ◽  
Content Type ◽  
Corporate Behavior ◽  
Emerging Trends ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this paper is to highlight the ways in which long running secular trends and the COVID-19 pandemic have combined to re-energize labor movements and pushed political thinking to the left. Design/methodology/approach A review of emerging trends in public opinion and labor action to identify some critical tipping points. Findings There is a critical shift unfolding in which government intervention to stem income inequality is becoming politically acceptable. Originality/value To the best of the author’s knowledge, there have been few, if any comparable discussions of the relationship between the impact of the COVID-19 pandemic and the political will to stem income inequality and the implications for corporate behavior.

scholarly journals Growth and Income Inequality: A Comparative Analysis

2012 ◽  
Vol 2012 ◽  
pp. 1-7 ◽  
Author(s):  
Ayla Ogus Binatli
Keyword(s):  
Comparative Analysis ◽  
Income Inequality ◽  
Time Period ◽  
Negative Effect ◽  
Time Periods ◽  
Growth Changes ◽  
Changes Over Time ◽  
The Relationship ◽  
Positive Effect ◽  
Over Time

This paper investigates whether the relationship between income inequality and growth changes over time. Two time periods, covering 1970–1985 and 1985–1999, are analyzed and compared. A statistically significant relationship between inequality and growth in either time period fails to emerge. However, there are indications that effect of inequality on growth may be different in the nineties when compared to the seventies. In the literature, a consistent negative effect of inequality on growth is documented although the significance of the effect is open to debate. This paper also finds a negative effect of income inequality on growth in the seventies but, although statistically insignificant, a consistently positive effect in the nineties.

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