An Econometric Analysis of the Bifurcation of Within-Country Inequality Trends in Sub-Saharan Africa 1990-2011
This paper documents the income inequality changes that have occurred in Sub-Saharan Africa over 1991-2011. It shows that during the 2000s 17 countries recorded an inequality decline and 12 a rise. It then discusses the drivers of this bifurcation by testing their impact through a multivariate macro-panel regression.
The results show that the growth of GDP per capita was unrelated to inequality but that its composition was closely associated with it. A better-distributed human capital reduced inequality while lack of land reforms and high population growth increased inequality.
As for global conditions, remittances and rising world agricultural prices were equalizing, but rising FDI and terms of trade in extractive industries were regressive. ODA was statistically non-significant, but debt cancellation in HIPC-eligible countries reduced the Gini significantly. Domestic policy changes had a mixed effect. A rise in direct taxes and targeted social expenditure reduced inequality, trade liberalization was unequalizing, while a stable macroeconomy, low inflation and competitive exchange rate reduced income polarization.
Exogenous shocks generated contrasting effects: the recent fall in HIV/AIDS incidence reduced inequality modestly, while conflict intensity increased it. Democratization did not have a clear effect.