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Rural-urban inequality in Africa: A panel study of the effects of trade liberalization and financial deepening

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  • Baliamoune-Lutz, Mina
  • Lutz, Stefan H.

Abstract

Using panel data from 39 countries, this paper examines the effects of financial deepening and openness to trade and foreign capital (FDI) on rural-urban inequality in Africa. Four estimations were performed–OLS pooled cross-section, GLS pooled cross-section, fixedeffects model and an adjusted fixed-effects specification with regional dummy terms. We have developed an alternative measure of rural-urban inequality, namely the ratio of growth in agricultural output to growth of manufacturing output. Overall, the econometric results show that openness to trade seems to contribute to reducing rural-urban inequality. However, the empirical evidence does not unambiguously delineate the nature of the impact FDI and financial deepening have on the rural-urban gap. The findings imply that there may be some support for the so-called offsetting-trend in inequality (OTI) hypothesis.

Suggested Citation

  • Baliamoune-Lutz, Mina & Lutz, Stefan H., 2004. "Rural-urban inequality in Africa: A panel study of the effects of trade liberalization and financial deepening," ZEI Working Papers B 06-2004, University of Bonn, ZEI - Center for European Integration Studies.
    • Handle: RePEc:zbw:zeiwps:b062004
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    2. Samuel Adams & Edem Kwame Mensah Klobodu, 2016. "Financial development, control of corruption and income inequality," International Review of Applied Economics, Taylor & Francis Journals, vol. 30(6), pages 790-808, November.

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