top of page
Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute
Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute

Economics and Business

Quarterly Reviews

ISSN 2775-9237 (Online)

asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
crossref
doi
open access

Published: 17 September 2024

Re-examining the Link Between Economic Growth and Income Inequality in Sub-Saharan African Countries: Do Natural Resource Endowments Matter?

Mohamadou Oumarou, Oumarou Sali, Alioum Hamadou

The University of Garoua (Cameroon), The University of Yaounde-II (Cameroon)

asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, management journal

Download Full-Text Pdf

doi

10.31014/aior.1992.07.03.608

Pages: 239-254

Keywords: Economic Growth, Income Inequality, Natural Resource Endowments, Sub-Saharan Africa

Abstract

Do natural resource endowments influence the relationship between economic growth and income inequality in Sub-Saharan African (SSA) countries? This is the main question of this article. To this end, we use polynomial non-linear modeling and non-parametric and semi-parametric modeling applied to a panel of 43 SSA countries between 2000 and 2020. The data used come from World Development Indicators (WDI) and the University of Texas Inequality Project. In order to enrich the empirical literature on the subject, four indices measure income inequality in the econometric tests. All other things being equal, the results show that the growth-inequality link is non-linear, with a positive trend that changes convexity with the level of growth. Rents from non-renewable natural resources (oil, gas and other minerals) accentuate the negative effect of growth on inequality, while income from renewable resources (water and forests) has the effect of reducing inequality. Furthermore, these results show that rents from a single product (a single natural resource) have no impact on inequality. On the other hand, income from the export of several natural resources accentuates the effect of growth on inequality. Consequently, SSA countries need to put in place a general policy to reduce inequalities and a strategy to reduce their dependence on the exploitation of natural resources. This can be achieved through the structural transformation of economies and the development of global value chains.

References

  1. Acheampong, A.O., Adebayo, T.S., Dzator, J. & saac Koomson. (2023). Income inequality and economic growth in BRICS: insights from non-parametric techniques. J Econ Inequal 21, 619-640. https://doi.org/10.1007/s10888-023-09567-9.

  2. Alesina, A. & Roberto Perotti. (1996). Income Distribution, Political Instability, And Investment. European Economic Review, 40(6,June), 1203-1228.

  3. Ali H.S., Law S.H., Lin W.L., Yusop Z., Chin L. & Bare U.A.A. (2019). Financial development and carbon dioxide emissions in Nigeria: evidence from the ARDL bound approach. GeoJournal, 83, 641-655.

  4. Alvaredo, Facundo, Lucas Chancel, Thomas Piketty, Emmanuel Saez, & Gabriel Z. (2018). The Elephant Curve of Global Inequality and Growth. AEA Papers and Proceedings, 108: 103-08.

  5. Barro, R. J. (2000). Inequality and growth in a panel of countries. Journal of Economic Growth, 5 (1), pp. 5-32.

  6. Bassirou L. & Ramde F. (2019). Financial development and structural transformation of the African countries in the franc zone: a panel-VAR approach Financial development and structural transformation of the countries in the African franc zone: a panel-Var approach. Economic interventions, 61(61),DOI:10.4000/economic intervention5390

  7. Barro Robert & Jong-Wha Lee (1996). International Measures of Schooling Years and Schooling Quality. American Economic Review, 1996, vol. 86, issue 2, 218-23

  8. Bhagwati, J. (1958). Immiserizing Growth: A Geometrical Note. The Review of Economic Studies, 25(3), 201-205. https://doi.org/10.2307/2295990

  9. Benos, N. & Karagiannis, S. (2018). Inequality and growth in the united states: Why physical and human capital matter. Economic inquiry, 56(1), pp.572-619.

  10. Bhorat, H. & Van der Westhuizen, C. (2008). Economic growth, poverty and inequality in South Africa: The first decade of democracy. Development Policy Research Unit Conference, pp. 27-29.

  11. Braun, M., Parro, F. & Valenzuela, P. (2019). Does finance alter the relation between inequality and growth?. Economic Inquiry, 57(1), pp.410-428.

  12. Breunig, R. & Majeed, O. (2020). Inequality, poverty, and growth. International Economics, 161(C), pp 83-99.

  13. Brueckner, M. & Lederman, D. (2018). Inequality and economic growth: The role of initial income. Journal of Economic growth, 23(3), pp 341-366.

  14. Cingano, F. (2014). « Trends in Income Inequality and its Impact on Economic Growth », Documents de travail de l’OCDE sur les questions sociales, l'emploi et les migrations, n° 163, Éditions OCDE, Paris, https://doi.org/10.1787/5jxrjncwxv6j-en.

  15. Cleveland, W. S. (1979). Robust Locally Weighted Regression and Smoothing Scatterplots. Journal of the American Statistical Association, 74(368), 829-836.

  16. De Dominicis, L., Florax, R.J., & De Groot, H.L. (2008). A meta-analysis on the relationship between income inequality and economic growth. Scottish J. Polit. Econ. 55(5), 654-682.

  17. Forbes, K. (2000). A reassessment of the relationship between inequality and growth. American Economic Review, 90(4), pp. 869-887.

  18. Khan, H., Weili, L. & Khan, I. (2023). The effect of political stability, carbon dioxide emission and economic growth on income inequality: evidence from developing, high income and Belt Road initiative countries. Environmental Science and Pollution Research, 30, 6758-6785. https://doi.org/10.1007/s11356-022-22675-9

  19. Khan M. A. & Ozturk I. (2020). Examining foreign direct investment and environmental pollution linkage in Asia. Environmental Science and Pollution Research, 27, 7244-7255.

  20. Kuznets, S. (1955). Economic Growth and Income Inequality. The American Economic Review, 45(1), 1-28. http://www.jstor.org/stable/1811581.

  21. Gao, X. & Fan, M. (2023). The effect of income inequality and economic growth on carbon dioxide emission. Environmental Science and Pollution Research30, 65149-65159. https://doi.org/10.1007/s11356-023-27009-x.

  22. Hafezali Iqbal Hussain et al. (2023). Does income inequality influence the role of a sharing economy in promoting sustainable economic growth? Fresh evidence from emerging markets, Journal of Innovation & Knowledge, Volume 8, Issue 2, April-June, 100348

  23. Hailemariam, A., & Dzhumashev, R. (2020). Income inequality and economic growth: Heterogeneity and nonlinearity. Studies in Nonlinear Dynamics & Econometrics, 24(3), 1-15. https://doi.org/10.1515/snde-2018-0084.

  24. Halter, D., Oechslin, M. & Zweimüller, J. (2014). Inequality and growth: The neglected time dimension. Journal of Economic Growth, 19(1), pp. 81-104.

  25. Haseeb A., Xia E., Baloch A.M. & Abbas K. (2018). Financial development, globalization, and CO2 emission in the presence of EKC: evidence from BRICS countries. Environmental Science and Pollution Research, 25, 31283-31296.

  26. Iwan Harsono, Lalu M. Furkan, Baiq Saripta Wiji Mulawiani, Helmy Fuady & Titi Yuniarti (2024), Income Inequality and Economic Growth. Economics Studies and Banking Journal , 1(3), 166-175.

  27. Jauch, S. & Watzka, S. (2016). Financial development and income inequality: a panel data approach. Empirical Economics, 51, 291-314. https://doi.org/10.1007/s00181-015-1008-x

  28. Joseph Djaowe & Woulkam Bouba (2018). Institutions et attractivité des investissements directs étrangers au Cameroun, International Journal of Innovation and Scientific Research, Vol. 38 No. 2, pp. 257-271 http://www.ijisr.issr-journals.org/

  29. Iyke, B.N. & Ho, S.Y. (2017). Income inequality and growth: New insights from Italy. International Economics, 70(4), pp. 419-442.

  30. Langel, M. (2012). Measuring inequality in finite population sampling. Doctorat Thesis, University of Neuchâtel.

  31. Lemieux, Thomas. (2006). Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?. American Economic Review, 96 (3): 461-498.

  32. Madsen, J. B., Islam, M. R., & Doucouliagos, H. (2018). Inequality, financial development and economic growth in the OECD, 1870–2011. European Economic Review, 101, 605-624. https://doi.org/10.1016/j.euroecorev.2017.11.004.

  33. Majeed, M.T. (2016). Economic growth and income inequality nexus: An empirical analysis for Pakistan. Kashmir Economic Review, 25(1), pp. 1-12.

  34. Mansour Mohamed Salah & Wendel Miriam (2015). Finance And Inequality -Evidence From East Asia. Eurasian Journal of Economics and Finance, 3(3), 1-16.

  35. Marrero, G. A., & Servén, L. (2022). Growth, inequality and poverty: a robust relationship?. Empirical Economics, 63(2), 725-791.

  36. Mary Amponsah, Frank W. Agbola & Amir Mahmood (2023). The relationship between poverty, income inequality and inclusive growth in Sub-Saharan Africa, Economic Modelling, Volume 126, 2023, 106415, ISSN 0264-9993, https://doi.org/10.1016/j.econmod.2023.106415

  37. Menyelim CM, Babajide AA, Omankhanlen AE. & Ehikioya BI. (2021). Financial Inclusion, Income Inequality and Sustainable Economic Growth in Sub-Saharan African Countries. Sustainability, 13(4):1780. https://doi.org/10.3390/su13041780.

  38. Mignamissi, D. & Kuete, Y.F.M. (2021). Resource Rents and Happiness on a Global Perspective: The Resource Curse Revisited. Resources Policy, 71, 101994.

  39. Mundell, R. A. (1957). International Trade and Factor Mobility. The American Economic Review, 47(3), 321-335. http://www.jstor.org/stable/1811242

  40. Nicholas Kaldor (1955). Alternative Theories of Distribution. The Review of Economic Studies, Volume 23, Issue 2, Pages 83-100, https://doi.org/10.2307/2296292.

  41. Niyimbanira, F. (2017). Analysis of the impact of economic growth on income inequality and poverty in South Africa: The case of Mpumalanga province. International Journal of Economics and Financial Issues, 7(4), pp. 254-261.

  42. Ostry, Jonathan; Berg, Andrew & Tsangarides, Charalambos. (2014). Redistribution, Inequality, and Growth. Institutional economics review 16. 53-81.

  43. Piketty, T. (2013). Capital in the 21st Century, Seuil, Coll. “Les livres du nouveau monde”, 970 p.

  44. Piketty, T. (1997). The dynamics of the wealth distribution and the interest rate with credit rationing. The Review of Economic Studies, 64(2), 173-189.

  45. Pritchett, L. (2001). Where Has All the Education Gone ?. World Bank Economic Review, 15, 367-391.

  46. Rangel, L.A., Andrade, J. & Divin, J.A. (2002). Economic growth and income inequality in Brazil: Analysing the comparable minimum areas. Working paper, Brazilian Institute for Applied Economic Research and University of Brasilia, Brazil.

  47. Scholl, N. & Klasen, S. (2019). Re-estimating the Relationship between Inequality and Growth. Oxford Economic Papers, 71(4), pp.824-847.

  48. Shahbaz, M. (2010). Income inequality, economic growth and nonlinearity: A case of Pakistan. International Journal of Social Economics, 37(8), pp. 613-636.

  49. Stiglitz, J. (2012). The Price of Inequality. London: Allen Lane. 414pp., £25, hbk. Journal of Social Policy, 2014;43(1):216-218. doi:10.1017/S0047279413000718

  50. World Bank (2019). Annual Report 2019 : Ending Poverty, Investing in Opportunity, reports/documentdetail/577041570463669942/the-world-bank-annual-report-2019-ending-poverty-investing-in-opportunity.

  51. Zakari A. & Tawiah V. (2019). Impact of Electricity Consumption, Financial Development, Trade Openness on CO2 Emissions: Evidence from Nigeria. Economic Studies journal, 4, 143-157.

bottom of page