Working Paper 353 - Inequality and the role of macroeconomic and institutional forces in Africa

This paper attempts to offer an empirical assessment of the main macroeconomic and institutional drivers of inequality in Africa. We also propose a two-step econometric methodology to account for the distributional properties of income per capita of economies in our sample. We employ panel data models and data sets encompassing 52 African countries. spanning the years 1980–2017. The findings suggest that (i) income per capita in Africa is divergent and there exist groups or “clubs” of convergence, (ii) the Kuznets’s curve relationship holds only for economies at the bottom of the income distribution, and (iii) macroeconomic and institutional factors play a limited role across African economies. This last finding shows that the distributional property of income may offer insight into which economic forces could help to reduce inequality in Africa.