Income Inequality And Its Correlates In Selected Sub-saharan African Countries Evidence From Panel Data

There is mixed evidence in the literature regarding the relationship between income inequality and its drivers. This study is an empirical analysis of income inequality in selected sub-Saharan African countries. I used a panel data set from 24 Sub-Saharan African countries spanning the decade from 2005 to 2014. Both descriptive and econometric analysis was applied to investigate how income inequality, measured using the Gini index, relates to other macroeconomic variables such as corruption, inflation, population growth rate, urbanization, GDP growth, government spending, mean years of schooling and female labor force participation. The results suggest that most variables have, at best, a very weak relationship with income inequality. Particularly estimates from panel data models indicate that the relationship observed in the pooled regression vanishes once we control for country fixed effects, suggesting a strong individual heterogeneity. Two lessons are drawn from these bizarre results. The first has to do with the possible role of measurement error and the importance of having accurate and complete data. The second is that, if the results, even to a certain extent, are to be trusted, then we should look for other country-specific long-run determinants of income and wealth distribution such as its history and institutions.

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