Estimating The Direct Effect of Economic Growth on Income Inequality in Sub-Saharan Africa: The Moderating Role of Natural Resource Governance.

Abstract

We examine the effect of natural resource governance on the direct impact of economic growth on income inequality in Sub-Saharan African countries. We use data from a panel of 40 of these countries, in which natural resource revenues represent at least 5% of GDP over the period 2001–2020. Dynamic panel data models are estimated using the System Generalized Method of Moments technique. Estimation yields two important results. First, economic growth is found to be increasing income inequality in these panel countries, whatever the income inequality measure is considered. Second, natural resource governance improvement, captured by the Extractive Industries Transparency Initiative (EITI)_Engagement and by the EITI_Compliance, is found to be directly reducing income inequality and to be reducing the income inequality increasing effect of economic growth in these countries. We conclude the paper by recommending that SSA-rich natural resource-rich countries, in search of justice, peace, and development, should engage and conform to EITI requirements.