What drives income inequality in sub‐Saharan Africa and its sub‐regions? An examination of long‐run and short‐run effects

Abstract

AbstractThis paper contributes to the understanding of the long‐run and short‐run drivers of income inequality in sub‐Saharan Africa (SSA) and its sub‐regions based on the evidence from bootstrap cointegration and autoregressive distributed lag (ARDL) model. The findings from the bootstrap cointegration test reveal a long‐run relationship exists for almost the entire SSA and its sub‐regions for the dependent variable, independent variables and the overall models. The exception being West Africa where the dependent variable was not statistically significant but the independent variables and overall model were cointegrated. The results from the ARDL show that for SSA, in the long run, economic growth decreases the uneven distribution of income whereas in the short run economic growth increases inequality. A reduction in corruption in the short run and long run makes inequality fall. Population growth in the long run and short run aggravates the distribution of income. A rise in the rate of unemployment in the short run and long run has a positive relationship with income inequality. Trade globalization in the long run heightens inequality but is not significant in the short run.