Investigating into the Employment and Income Inequality Nexus in Sub-Saharan Africa

Abstract

This paper aims to examine the relationship between employment and income inequality in Sub-Saharan African countries. Even though the region has experienced a decade of positive economic growth, it has the second highest level of income inequality in the world. The drivers of income inequality are quantitatively investigated using data from 1991 to 2015 by the Fully Modified Ordinary Least Squares technique. The results show that employment, trade and domestic investment reduce income inequality in the region in the long term. Higher trade tends to improve income equality in middle-income countries. Alternatively, domestic investment and trade have more potential to reduce inequality in low-income economies. Controlling corruption is essential in the long run for job creation, irrespective of the development stage of the country. There is thus evidence to show that policies must be oriented to more opportunities of employment, domestic investment, trade and good governance in terms of low corruption.

Revisiting the effects of natural resources on income inequality in Sub-Saharan Africa

“…Contrary to the natural resource curse theory, which shows a positive relationship between natural resources rents and income inequality (Sebri and Dachraoui, 2021 for a meta-analytical review). The rentier state theory[1], states that in an attempt by policymakers to suppress rebellion, they can use the high revenues from natural resources to implement large-scale distributive or populist policies (Basedau and Lay, 2009) by promoting public sector employment, thereby helping to curb income inequality (Gokhool et al , 2021; Mehic, 2018). In addition, the rentier state theory posits that natural resources can reduce inequality through the channel of human capital.…”