Why Is Inequality High in Africa?†

Abstract

This paper computed asset-based inequality for 38 African countries in multiple waves, using over a million household histories, to study why inequality tends to be persistently high in Africa. The results show that within-country asset inequality is positively correlated with the returns to higher education, a finding that is corroborated by results showing a negative correlation between consumption-based inequality and the proportion of households that completed tertiary education. Countries with higher remittance flows also experienced lower inequality, whereas assets and goods market distortions tended to increase inequality in Africa. The paper also decomposed within-country inequality into components deemed to represent opportunities beyond the control of individuals and those attributed to individual efforts, such as education. At least 30% of asset inequality within countries was, on average, due to inequality of opportunity, though there were considerable differences across countries. In addition, the incidence of child mortality and disease burden of malaria and tuberculosis tended to increase with asset-based inequality of opportunity, which increased with ethnic fractionalisation but decreased with improved governance.