Revisiting the effects of natural resources on income inequality in Sub-Saharan Africa

Abstract

PurposeThis study aims to analyze the effects of natural resource rents on income inequality.Design/methodology/approachThis study uses a panel quantile regression (QR) approach for 42 Sub-Saharan African (SSA) countries over the period 1998–2018.FindingsThe results show that natural resource rents have a negative and statistically significant effect on income inequality. Regarding the types of resources, the results show that coal rents increase inequality, while forestry and oil rents reduce income inequality. The results also show that the effects of mining and gas rents vary along the income inequality distribution. Finally, the results reveal a negative and significant effect of natural resource rents on income inequality in all sub-regions except Southern Africa.Practical implicationsThe results suggest that the SSA Governments should intensify the implementation of income redistribution policies such as family allowances to poor families with multiple children and public sector job creation. SSA policymakers should also increase access to electricity, and internet, and allocate a portion of oil revenues to create an intergenerational sovereign wealth fund.Originality/valueFirst, few studies have analyzed the effects of various types of natural resource rents on income inequality. To this end, this study used the QR method to examine the impact of natural resource rents on inequality, by laying emphasis on various types of natural resources. This study takes into account the likely heterogeneity across countries that may exist when considering a sample such as SSA countries, by examining the effects in the different sub-regions that make up this part of Africa (Central Africa, West Africa, Southern Africa and East Africa).