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

Abstract

Purpose This study aims to analyze the effects of natural resource rents on income inequality. Design/methodology/approach This study uses a panel quantile regression (QR) approach for 42 Sub-Saharan African (SSA) countries over the period 1998–2018. Findings The results show that natural resource rents have a negative and statistically significant effect on income inequality. Regarding the types of resources, the results show that coal rents increase inequality, while forestry and oil rents reduce income inequality. The results also show that the effects of mining and gas rents vary along the income inequality distribution. Finally, the results reveal a negative and significant effect of natural resource rents on income inequality in all sub-regions except Southern Africa. Practical implications The results suggest that the SSA Governments should intensify the implementation of income redistribution policies such as family allowances to poor families with multiple children and public sector job creation. SSA policymakers should also increase access to electricity, and internet, and allocate a portion of oil revenues to create an intergenerational sovereign wealth fund. Originality/value First, few studies have analyzed the effects of various types of natural resource rents on income inequality. To this end, this study used the QR method to examine the impact of natural resource rents on inequality, by laying emphasis on various types of natural resources. This study takes into account the likely heterogeneity across countries that may exist when considering a sample such as SSA countries, by examining the effects in the different sub-regions that make up this part of Africa (Central Africa, West Africa, Southern Africa and East Africa).

Effect of natural resources rents on income inequality in sub-Saharan Africa: exploring the direct and indirect transmission mechanisms

“…Referring to the studies undertaken by Avom et al (2022) and Alvarado et al (2021), we specify the model to analyse the effect of natural resources rents and education on income inequality in SSA as follows: For i = 1, 2, …, N; t = 1, 2, …, T, where Ineq = income inequality; Ineq it −1 is the lagged income inequality; TNR = total natural resources rents; HCAP = education index; GDPC = real personal income per capita; ODA = official development assistance; ICT = individual using the internet; and ELEC = access to electricity, and δ i is unobserved country-specific effects.…”

“…The variable was obtained from the United Nations Development Programme database. To support the relationship between natural resources, education and income inequality and to avoid variable omission bias, our baseline analysis includes a subset of contemporaneous control variables, which are important for the analysis of income inequality (Asongu and Le Roux, 2017; Avom et al , 2022; Herzer and Nunnenkamp, 2012; Lee and Lee, 2018; Nguyen and Nasir, 2021). These variables include official development assistance, internet use, economic growth and access to electricity from the World Bank’s Development Indicators.…”

“…Indeed, Parcero and Papyrakis (2016) showed that very oil-rich countries with natural resources reduce income inequality. Avom et al (2022) showed in SSA that natural resource rents have a negative and significant effect on income inequality in all sub-regions except Southern Africa. On the other hand, there are some studies that revealed contrary results of the effect of natural resources on income inequality.…”

“…Considering the mixed relationship between natural resources rents and income inequality (Avom et al , 2022; Davis, 2020; Hartwell et al , 2019; Kim and Lin, 2018; Mohtadi and Castells-Quintana, 2021), human capital can serve as a catalyst to reduce the gap between natural resources rents and income inequality. Otherwise, rents from natural resources would be invested in human capital to reduce income inequality.…”

What abates environmental efficiency in African economies? Exploring the influence of infrastructure, industrialization, and innovation

“…The African continent also has the top-ranking economy in terms of natural resource abundance as of 2018, however it imports 20 out of 90 inorganic commodities (Katoka and Dostal, 2022;Zallé, 2019). African CO2 emissions, energy use, and natural resources provide a unique opportunity to learn more about the factors affecting the environment on the continent (Avom et al, 2022). Around the world, environmental protection has become a hot concern for academics and decision-makers.…”