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Rural-Urban Inequality in Africa: A Panel Study on the Effects of Trade Liberalization and Financial Depending

  • Mina Baliamoune-Lutz

    ()

    (University of North Florida)

  • Stefan H. Lutz

    (University of Manchester)

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, fixed effects model and an adjusted fixed effects specification with regional dummy terms. We construct 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 help reduce rural-urban inequality. However, the empirical evidence does not unambiguously delineate the nature and significance 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.

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Article provided by African Finance and Economic Association in its journal Journal of African Development.

Volume (Year): 7 (2005)
Issue (Month): 1 ()
Pages: 1-19

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Handle: RePEc:afe:journl:v:7:y:2005:i:1:p:1-19
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