Information technology, income inequality and economic growth in sub-Saharan African countries

Abstract

In this paper, the dynamic relationship between ICT, income inequality and economic growth in sub-Saharan African (SSA) countries is examined during the period 2004–2014. Three ICT and three income inequality indicators were used to examine this linkage. The ICT indicators used include internet penetration, mobile phone penetration and fixed broadband subscription, while the income inequality indicators include the Gini coefficient, the Atkinson index and the Palma ratio. Using the Generalised Method of Moments (GMM) estimation technique, the study found that, on the whole, an increase in ICT development unconditionally leads to an increase in economic growth in the countries under study. The study also found that the threshold level of income inequality, which should not be exceeded in order for the positive impact of ICT on economic growth to be sustained, depends on the ICT proxy used and the income inequality indicator. Specifically, the study found that for ICT to have a sustained positive impact on economic growth, i) the Gini coefficient in the mobile penetration specification should not exceed 0.520; ii) the Gini coefficient and Atkinson index in the internet penetration specification should not exceed 0.531 and 0.560, respectively; and iii) the Gini coefficient, Atkinson index and Palma ratio in the fixed broadband subscriptions should not exceed 0.551, 0.633 and 4.664, respectively. Policy implications are discussed.