Finance and Inequality: Exploring Pro-Poor Investment Channels in Africa

Simplice, A Asongu

doi:10.2139/ssrn.2493156

“…Domestic investors compare the returns to domestic and foreign investments while private investors and bank lenders will invest within the African economy only if returns are attractive enough. From a broad perspective, the results of financial openness are consistent with empirical investment-inequality literature (Pan-Long, 1995;Basu & Guariglia, 2007;Kai & Hamori, 2009;Asongu, 2011a) and theoretical postulations (Greenwood & Jovanovic ,1990). All these have pointed to the disequalizing redistributive income effect of foreign investment, which in contextual terms depict decrease in inequality adjusted human development.…”

Section: Globalization and Human Developmentsupporting

confidence: 82%

Globalization and Africa: implications for human development

Asongu

¹

2013

International Journal of Development Issues

54

1

0

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in February 2012Abstract Purpose -The purpose of this paper is to assess the effects of trade and financial globalization on human development in 52 African countries using updated data (1996-2010) and a new indicator of human development (adjusted for inequality).Design/methodology/approach -The estimation technique used is a Two-Stage-Least Squares Instrumental Variable methodology. Instruments include: income-levels, legal-origins and religious-dominations. The first-step consists of justifying the choice of the estimation technique with a Hausman-test for endogeneity. In the second-step, we verify that the instrumental variables are exogenous to the endogenous components of explaining variables (globalization dynamic channels) conditional on other covariates (control variables). In the third-step, the strength and validity of the instruments are assessed with the Cragg-Donald and Sargan overidentifying restrictions tests respectively. Robustness checks are ensured by: (1) use of alternative globalization indicators; (2) endogeneity based estimation; (3) adoption of two interchangeable sets of instruments; (4) estimation with a technique that controls for timeinvariant unobservable shocks that affect openness and human development simultaneously.Findings -Findings broadly indicate that while trade globalization improves human development (consistent with the neoliberal theory), financial globalization has the opposite effect (in line with the hegemony thesis). The 'life expectancy' component of the HDI weighs most in the positive impact of trade globalization on human emancipation.Practical implications -Capital accounts should be opened in tandem with financial and institutional development. The investment atmosphere needs improvement to curtail capital flight (about 39%). Other policy implications include: adoption of openness options in a selective and gradual manner, development of some industrial backbone for an importsubstitution or export-led industry, emphasis on regional trade and building capacity, development of the agricultural sector with continuous government assistance, building of rural infrastructure, increasing adult literacy rate and developing human resources, fighting corruption and mitigating wastages in government expenditure.1 Simplice A. Asongu is Lead economist in the Research Department of the AGDI (asongus@afridev.org). 3Originality/value -These findings are based on very recent data. Usage of the in...

show abstract

“…In this paper, we have assessed the income-redistributive incidence of various liberalisation policies and our findings could be discussed in four strands. and measure of inequality, Kai & Hamori(2010) and Asongu (2011a) have used the de facto FDI as a measure of capital account openness and found financial liberalization to fuel income-inequality. Besides conceptual and methodological differences, the present paper steers clear of those above in its use of updated data.…”

Section: Discussion and Policy Implicationsmentioning

confidence: 99%

The impact of liberalisation policies on income inequality in African countries

Batuo

¹

,

Asongu

²

2015

Journal of Economic Studies

View full text Add to dashboard Cite

Despite over three decades of Liberalisation policies in Africa, income-inequality has stayed persistently high. Using updated panel data of 26 African countries spanning the period 1996-2010, this study examines the effect of liberalisation policies with particular focus on financial, trade, institutional, political and economic liberalisations on income-inequality. We find: that financial liberalisation has a levitated income-redistributive effect with the magnitude of the de jure measure (KAOPEN) higher than that of the de facto measure (FDI); that exports, trade and 'freedom to trade' have an equality incidence on income-distribution;and that institutional and political liberalisation has a negative impact and we also find that, economic freedom has a negative income-redistributive effect possibly because of the weight of its legal component. The impact of these policies implications are discussed in detail in this study.JEL Classification: F30; F41; F50; O15; O55

show abstract

“…To make these assessments, we use the panel TSLS-IV estimation method with financial and trade liberalization measures as instrumental variables. -Long, 1995;Basu & Guariglia, 2007;Kai & Hamori, 2009;Asongu, 2011b) and theoretical postulations (Greenwood & Jovanovic, 1990). All these have emphasized the disequalizing redistributive income effect of foreign investment, which in contextual terms depict decrease in inequality adjusted human development.…”

Section: Empirical Analysismentioning

confidence: 99%

Globalization, (Fighting) Corruption and Development: How are These Phenomena Linearly and Nonlinearly Related in Wealth Effects?

Asongu

¹

2012

Self Cite

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Design/methodology/approach -Though not in form, yet in substance the intuition and motivation are compatible with those of Lalountas et al. (2011). Four hypotheses are tested from different methodological and contextual standpoints. In the analysis, while the economic and social dimensions of globalization are reflected in the HDI, the political dimension is captured by good governance indicators. A TSLS-IV estimation technique is applied where-in globalization instruments of trade and financial liberalization are instrumented on human-development and government-quality to account for corruption (corruption-control) effects. Thus the intuition is assessing how globalization is instrumental in the fight against corruption through human development (economic and social dimensions) and government quality (political dimension). Terms of use: Documents in

show abstract

Finance and Inequality: Exploring Pro-Poor Investment Channels in Africa

Cited by 8 publications

References 57 publications

Globalization and Africa: implications for human development

Globalization and Africa: implications for human development

The impact of liberalisation policies on income inequality in African countries

Globalization, (Fighting) Corruption and Development: How are These Phenomena Linearly and Nonlinearly Related in Wealth Effects?

Contact Info

Product

Resources

About