Poverty reduction in sub-Saharan Africa: The mixed roles of democracy and trade openness

Abstract

This paper examines the impact of democracy and trade openness on poverty. To this end, we estimate a poverty model using the generalized method of moments (system-GMM) on a sample of 24 sub-Saharan African countries during the period 2005–2016. The econometric estimates provide two main sets of results. On the linear effects side, we find that democracy increases income poverty in non-oil producing countries and has no effect in oil producing countries, while trade openness has no impact on poverty. On the non-linear side, we find that imports improve household living conditions in democratic oil-producing countries on the one hand, and contribute to reducing monetary poverty in democratic non-oil-producing countries on the other. Our results are robust to estimates by different democracy indicators. Democracy and trade openness should therefore not be considered in isolation, and simultaneous policies are needed to enhance their impact on poverty in sub-Saharan Africa.