Interregional Inequality in Africa, Convergence and Multiple Equilibria: Evidence from Night-Time Light Data

Abstract

Understanding the dynamics of interregional inequality is important when formulating development policies. In this paper, we investigate the convergence pattern in regional inequality within 49 African countries over the period 1992-2012 using satellite night-light based inequality proxies. We find evidence of multiple equilibria in regional income inequality. Four convergent clubs is distinguished instead of overall convergence. The results show that countries with high regional inequality steadily do not converge over time towards those of countries with low regional inequality, indicating that these countries are indeed stuck in regional income inequality traps. From the convergence analysis, we further analyze through an ordered logit estimation those relevant variables that drive convergence club formation. We find that the level of initial conditions such as GDP per capita, urbanization, natural resources rents and the change in country size are significant in explaining convergence club formation.