The influence of inequality, institutional quality, and foreign aid on inclusive growth in Africa

Abstract

Growing inequality in Africa warrants continuing research. This study concentrates on the impact of institutional quality, income inequality, and foreign aid on inclusive growth in 48 countries in Africa spanning 2002 to 2018. By adopting the two-step system generalised method of moments (Sys-GMM), the study conducted the estimations of the model. Income inequality mostly has a negative influence on inclusive growth. All institutional quality indicators except government effectiveness positively influenced inclusive growth. Foreign aid does not help inclusive growth in Africa. On the contrary, foreign aid sometimes retards or stagnates inclusive growth. To attain and sustain a positive inclusive growth in Africa, much effort must be put in the creation of quality jobs. While halting the overreliance on foreign aid, African countries can more strategically emphasise self-centred development.