IDEAS home Printed from https://ideas.repec.org/p/exs/wpaper/23-030.html
   My bibliography  Save this paper

The effect of inequality on poverty and severity of poverty in SSA: the role of financial development institutions

Author

Listed:
  • Simplice A. Asongu

    (Yaounde, Cameroon)

  • Nicholas M. Odhiambo

    (Pretoria, South Africa)

Abstract

The present study investigates the incidence of financial institutions' dynamics of depth and access in the effect of income inequality on poverty and the severity of poverty in 42 Sub-Saharan African countries from 1980 to 2019. The Gini index is used to measure income inequality while poverty is measured as the poverty headcount ratio, and the severity of poverty is generated as the squared of the poverty gap index. An interactive quantile regression approach is used as an empirical strategy. Income inequality unconditionally increases poverty dynamics while the financial institutions' depth and access mitigate the adverse effects of income inequality on poverty dynamics. Financial institutions’ policy thresholds or minimum financial institutions levels needed to completely dampen the adverse effects of income inequality on poverty dynamics are provided. The findings are contingent on existing levels of poverty, poverty measurement and proxies for financial institutions. Policy implications are discussed.

Suggested Citation

  • Simplice A. Asongu & Nicholas M. Odhiambo, 2023. "The effect of inequality on poverty and severity of poverty in SSA: the role of financial development institutions," Working Papers 23/030, European Xtramile Centre of African Studies (EXCAS).
    • Handle: RePEc:exs:wpaper:23/030
    as

    Download full text from publisher

    File URL: http://publications.excas.org/RePEc/exs/exs-wpaper/The-effect-of-inequality-on-poverty-and-severity-of-poverty-in-SSA.pdf
    File Function: Revised version, 2023
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Asongu, Simplice A. & Biekpe, Nicholas & Cassimon, Danny, 2021. "On the diffusion of mobile phone innovations for financial inclusion," Technology in Society, Elsevier, vol. 65(C).
    2. Vanessa S. Tchamyou & Simplice A. Asongu, 2017. "Information Sharing and Financial Sector Development in Africa," Journal of African Business, Taylor & Francis Journals, vol. 18(1), pages 24-49, January.
    3. Vanessa Simen Tchamyou, 2020. "Education, lifelong learning, inequality and financial access: evidence from African countries," Contemporary Social Science, Taylor & Francis Journals, vol. 15(1), pages 7-25, January.
    4. Boateng, Agyenim & Asongu, Simplice & Akamavi, Raphael & Tchamyou, Vanessa, 2018. "Information asymmetry and market power in the African banking industry," Journal of Multinational Financial Management, Elsevier, vol. 44(C), pages 69-83.
    5. Meniago, Christelle & Asongu, Simplice A., 2018. "Revisiting the finance-inequality nexus in a panel of African countries," Research in International Business and Finance, Elsevier, vol. 46(C), pages 399-419.
    6. Holtz-Eakin, Douglas & Joulfaian, David & Rosen, Harvey S, 1994. "Sticking It Out: Entrepreneurial Survival and Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 53-75, February.
    7. Simplice Asongu, 2014. "The Questionable Economics of Development Assistance in Africa: Hot-Fresh Evidence, 1996–2010," The Review of Black Political Economy, Springer;National Economic Association, vol. 41(4), pages 455-480, December.
    8. Ofori, Isaac K. & Armah, Mark K. & Taale, Francis & Ofori, Pamela E., 2021. "Addressing the Severity and Intensity of Poverty in Sub-Saharan Africa: How Relevant is the ICT and Financial Development Pathway?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue forthcomi.
    9. Anthony Orji & Ekene Aguegboh & Onyinye I. Anthony-Orji, 2015. "Real Sector Output and Financial Liberalisation in Nigeria," Journal of Infrastructure Development, India Development Foundation, vol. 7(2), pages 136-150, December.
    10. Asongu, Simplice A. & Biekpe, Nicholas & Cassimon, Danny, 2020. "Understanding the greater diffusion of mobile money innovations in Africa," Telecommunications Policy, Elsevier, vol. 44(8).
    11. Pam Zahonogo, 2017. "Financial Development and Poverty in Developing Countries: Evidence from Sub-Saharan Africa," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(1), pages 211-220, January.
    12. Nicholas M. Odhiambo, 2014. "Financial systems and economic growth in South Africa: a dynamic complementarity test," International Review of Applied Economics, Taylor & Francis Journals, vol. 28(1), pages 83-101, January.
    13. Babajide Fowowe & Babatunde Abidoye, 2013. "The Effect Of Financial Development On Poverty And Inequality In African Countries," Manchester School, University of Manchester, vol. 81(4), pages 562-585, July.
    14. Asongu, Simplice A., 2017. "Assessing marginal, threshold, and net effects of financial globalisation on financial development in Africa," Journal of Multinational Financial Management, Elsevier, vol. 40(C), pages 103-114.
    15. Leila CHEMLI, 2014. "The Nexus Among Financial Development And Poverty Reduction: An Application Of Ardl Approach From The Mena Region," JOURNAL OF LIFE ECONOMICS, Holistence Publications, vol. 1(2), pages 133-148, October.
    16. Nchofoung, Tii N. & Asongu, Simplice A., 2022. "Effects of infrastructures on environmental quality contingent on trade openness and governance dynamics in Africa," Renewable Energy, Elsevier, vol. 189(C), pages 152-163.
    17. Nchofoung, Tii N. & Asongu, Simplice A., 2022. "ICT for sustainable development: Global comparative evidence of globalisation thresholds," Telecommunications Policy, Elsevier, vol. 46(5).
    18. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(1), pages 35-52.
    19. Abdul Rashid & Maurizio Intartaglia, 2017. "Financial development – does it lessen poverty?," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 44(1), pages 69-86, January.
    20. Asongu, Simplice A. & Biekpe, Nicholas, 2018. "ICT, information asymmetry and market power in African banking industry," Research in International Business and Finance, Elsevier, vol. 44(C), pages 518-531.
    21. Hossein Jalilian & Colin Kirkpatrick, 2005. "Does Financial Development Contribute to Poverty Reduction?," Journal of Development Studies, Taylor & Francis Journals, vol. 41(4), pages 636-656.
    22. Abosedra, Salah & Shahbaz, Muhammad & Nawaz, Kishwar, 2015. "Modeling Causality between Financial Deepening and Poverty Reduction in Egypt," MPRA Paper 67166, University Library of Munich, Germany, revised 09 Oct 2015.
    23. Samba Diop & Simplice A. Asongu, 2023. "The Covid-19 Pandemic and the New Poor in Africa: The Straw That Broke the Camel’s Back," Forum for Social Economics, Taylor & Francis Journals, vol. 52(2), pages 143-154, April.
    24. Martin Evans, Ricardo Nogales and Matthew Robson, 2020. "Monetary and Multidimensional Poverty: Correlations, Mismatches and Joint Distributions," OPHI Working Papers 133, Queen Elizabeth House, University of Oxford.
    25. Billger, Sherrilyn M. & Goel, Rajeev K., 2009. "Do existing corruption levels matter in controlling corruption?: Cross-country quantile regression estimates," Journal of Development Economics, Elsevier, vol. 90(2), pages 299-305, November.
    26. Gazi Salah Uddin & Muhammed Shahbaz & Mohamed Arouri & Frédéric Teulon, 2014. "Financial Development and Poverty Reduction Nexus: A cointegration and causality analysis in Bangladesh," Working Papers 2014-291, Department of Research, Ipag Business School.
    27. Oded Galor & Omer Moav, 1999. "From Physical to Human Capital Accumulation: Inequality in the Process of Development," Working Papers 99-27, Brown University, Department of Economics.
    28. Roger Koenker & Kevin F. Hallock, 2001. "Quantile Regression," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 143-156, Fall.
    29. M. Shabri Abd. Majid & Sovia Dewi & Aliasuddin & Salina H. Kassim, 2019. "Does Financial Development Reduce Poverty? Empirical Evidence from Indonesia," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 10(3), pages 1019-1036, September.
    30. Nicholas M. Odhiambo, 2010. "Is financial development a spur to poverty reduction? Kenya's experience," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 37(3), pages 343-353, August.
    31. Simplice A. Asongu & Joel Hinaunye Eita, 2023. "The conditional influence of poverty, inequality and severity of poverty on economic growth in Sub-Saharan Africa," Working Papers 23/022, European Xtramile Centre of African Studies (EXCAS).
    32. Kwangbin Bae & Dongsook Han & Hosung Sohn, 2012. "Importance of Access to Finance in Reducing Income Inequality and Poverty Level," International Review of Public Administration, Taylor & Francis Journals, vol. 17(1), pages 55-77, April.
    33. Vanessa S. Tchamyou, 2019. "The Role of Information Sharing in Modulating the Effect of Financial Access on Inequality," Journal of African Business, Taylor & Francis Journals, vol. 20(3), pages 317-338, July.
    34. Oded Galor & Omer Moav, 2004. "From Physical to Human Capital Accumulation: Inequality and the Process of Development," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(4), pages 1001-1026.
    35. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-827, August.
    36. Chani, Muhammad Irfan & Pervaiz, Zahid & Jan, Sajjad Ahmad & Ali, Amjad & Chaudhary, Amatul R., 2011. "Poverty, inflation and economic growth: empirical evidence from Pakistan," MPRA Paper 34290, University Library of Munich, Germany, revised 2011.
    37. Yaya Keho, 2017. "Financial Development and Poverty Reduction: Evidence from Selected African Countries," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 8(4), pages 90-98, October.
    38. Simplice A. Asongu & Jacinta C. Nwachukwu, 2016. "Rational Asymmetric Development, Piketty and Poverty in Africa," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 13(2), pages 221-246, December.
    39. Kunofiwa TSAURAI, 2020. "Financial Development-Poverty Reduction Nexus In Brics: A Panel Data Analysis Approach," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 20(2), pages 18-32.
    40. Nchofoung, Tii N. & Achuo, Elvis Dze & Asongu, Simplice A., 2021. "Resource rents and inclusive human development in developing countries," Resources Policy, Elsevier, vol. 74(C).
    41. Nicholas M. Odhiambo, 2010. "Is financial development a spur to poverty reduction? Kenya's experience," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 37(3), pages 343-353, August.
    42. Sourav Batabyal & Abdur Chowdhury, 2015. "Curbing corruption, financial development and income inequality," Progress in Development Studies, , vol. 15(1), pages 49-72, January.
    43. Brambor, Thomas & Clark, William Roberts & Golder, Matt, 2006. "Understanding Interaction Models: Improving Empirical Analyses," Political Analysis, Cambridge University Press, vol. 14(1), pages 63-82, January.
    44. Dean Jolliffe & James P. Ziliak (ed.), 2008. "Income volatility and Food Assistance in the United States," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ivfa, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simplice A. Asongu & Valentine B. Soumtang & Ofeh M. Edoh, 2021. "Financial institutions, poverty and severity of poverty in Sub-Saharan Africa," Working Papers of the African Governance and Development Institute. 21/081, African Governance and Development Institute..
    2. Asongu, Simplice A. & le Roux, Sara, 2023. "The role of mobile money innovations in transforming unemployed women to self-employed women in sub-Saharan Africa," Technological Forecasting and Social Change, Elsevier, vol. 191(C).
    3. Simplice A. Asongu & Peter Agyemang-Mintah & Joseph Nnanna & Yolande E. Ngoungou, 2024. "Mobile money innovations, income inequality and gender inclusion in sub-Saharan Africa," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-21, December.
    4. Simplice A. Asongu & Nicholas M. Odhiambo, 2023. "Microfinance institutions and female entrepreneurship in Sub-Saharan Africa: avoidable female unemployment thresholds," Working Papers of The Association for Promoting Women in Research and Development in Africa (ASPROWORDA). 23/007, The Association for Promoting Women in Research and Development in Africa (ASPROWORDA).
    5. Asongu, Simplice A. & Ngoungou, Yolande E. & Nnanna, Joseph, 2023. "Mobile money innovations and health performance in sub-Saharan Africa," Technology in Society, Elsevier, vol. 74(C).
    6. Simplice Asongu, 2023. "Female unemployment and the procedure that a woman has to go through to start a business: microfinance policy thresholds," Social Responsibility Journal, Emerald Group Publishing Limited, vol. 20(5), pages 939-955, December.
    7. Asongu, Simplice A. & Nnanna, Joseph & Acha-Anyi, Paul N., 2020. "Finance, inequality and inclusive education in Sub-Saharan Africa," Economic Analysis and Policy, Elsevier, vol. 67(C), pages 162-177.
    8. Simplice A. Asongu & Sara le Roux, 2023. "The role of mobile money innovations in the effect of inequality on poverty and severity of poverty in Sub-Saharan Africa," Working Papers of the African Governance and Development Institute. 23/046, African Governance and Development Institute..
    9. Asongu, Simplice A. & Odhiambo, Nicholas M., 2021. "Inequality, finance and renewable energy consumption in Sub-Saharan Africa," Renewable Energy, Elsevier, vol. 165(P1), pages 678-688.
    10. Simplice A. Asongu & Nicholas M. Odhiambo, 2022. "Financial Access and Value Added in Sub-Saharan Africa: Empirical Evidence from the Agricultural, Manufacturing and Service Sectors," Working Papers 22/009, European Xtramile Centre of African Studies (EXCAS).
    11. Asongu, Simplice A. & Nnanna, Joseph & Acha-Anyi, Paul N., 2020. "Inequality and gender economic inclusion: The moderating role of financial access in Sub-Saharan Africa," Economic Analysis and Policy, Elsevier, vol. 65(C), pages 173-185.
    12. Simplice A. Asongu & Joseph Nnanna & Paul N. Acha-Anyi, 2020. "Inclusive Education for Inclusive Economic Participation: the Financial Access Channel," Research Africa Network Working Papers 20/019, Research Africa Network (RAN).
    13. Tchamyou, Vanessa S. & Erreygers, Guido & Cassimon, Danny, 2019. "Inequality, ICT and financial access in Africa," Technological Forecasting and Social Change, Elsevier, vol. 139(C), pages 169-184.
    14. Simplice A. Asongu & Nicholas M. Odhiambo, 2023. "Female unemployment, mobile money innovations and doing business by females," Journal of Innovation and Entrepreneurship, Springer, vol. 12(1), pages 1-26, December.
    15. Simplice A. Asongu, 2020. "Financial Access and Productivity Dynamics in Sub-Saharan Africa," International Journal of Public Administration, Taylor & Francis Journals, vol. 43(12), pages 1029-1041, September.
    16. Simplice Asongu & Rexon Nting, 2021. "The role of finance in inclusive human development in Africa revisited," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 38(2), pages 345-370, February.
    17. Simplice A. Asongu & Joel Hinaunye Eita, 2023. "The conditional influence of poverty, inequality and severity of poverty on economic growth in Sub-Saharan Africa," Working Papers of the African Governance and Development Institute. 23/022, African Governance and Development Institute..
    18. Vanessa S. Tchamyou, 2019. "The Role of Information Sharing in Modulating the Effect of Financial Access on Inequality," Journal of African Business, Taylor & Francis Journals, vol. 20(3), pages 317-338, July.
    19. Vanessa S. Tchamyou & Juste Some & Simplice A. Asongu, 2022. "The African Continental Free Trade Area and Financial Development for Women Economic Participation in Africa," Working Papers of the African Governance and Development Institute. 22/040, African Governance and Development Institute..
    20. Simplice A. Asongu & Valentine B. Soumtang & Ofeh M. Edoh, 2021. "Financial determinants of informal financial development in Sub-Saharan Africa," Research Africa Network Working Papers 21/077, Research Africa Network (RAN).

    More about this item

    Keywords

    financial development; poverty alleviation; Africa;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I20 - Health, Education, and Welfare - - Education - - - General
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:exs:wpaper:23/030. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anutechia Asongu Simplice (email available below). General contact details of provider: http://excas.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.