The Consumption, Income, and Wealth of the Poorest: Cross-Sectional Facts of Rural and Urban Sub-Saharan Africa for Macroeconomists

This paper provides new empirical insights on the joint distribution of consumption, income, and wealth (CIW) in three of the poorest countries in the world - Malawi, Tanzania, and Uganda - all located in sub-Saharan Africa (SSA). Our first finding is that while income inequality is similar to that of the United States, wealth inequality is barely one-third that of the US. Similarly, while the top of the income distribution (1-10%) earns a similar share of total income in SSA as in the United States, the share of total wealth accumulated by the income-rich in SSA is one-fifth of its US counterpart. Our main contribution is to i) document this dwarfed transmission from income to wealth, which suggests that SSA households face a larger inability to save and accumulate wealth compared with US households; and ii) document a lower transmission from income to consumption inequality, which suggests the presence of powerful institutions that favor consumption insurance in detriment of saving. These features are more relevant for rural areas, which represent roughly four-fifths of the total population. We identify the few successful pockets of the SSA population that are able to accumulate wealth by exploring sources of inequality such as age, education, migration, borrowing ability, and societal systems.