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Effects of trade openness on income inequality in sub-Saharan Africa: direct effects and transmission channels

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  • Ouedraogo, Benoît
  • Ouedraogo, Idrissa
  • Sawadogo, Hamidou

Abstract

This research investigates the effects of trade openness on income inequality in sub-Saharan Africa (SSA). The analysis relies on an unbalanced panel of 39 countries over the period 2002–2022 and employs the two-step System Generalized Method of Moments (GMM). The results show that trade openness reduces income inequality in SSA. Moreover, this inequality-reducing effect is more pronounced in the most unequal countries compared to the least unequal ones. Both exports and imports contribute to reducing income inequality, with exports having a stronger effect than imports. Furthermore, trade openness reduces income inequality through human capital development, institutional quality, and GDP per capita. These findings suggest that strengthening human capital, improving institutional quality, and fostering economic development can enhance the inequality-reducing effects of trade openness.

Suggested Citation

  • Ouedraogo, Benoît & Ouedraogo, Idrissa & Sawadogo, Hamidou, 2025. "Effects of trade openness on income inequality in sub-Saharan Africa: direct effects and transmission channels," International Economics, Elsevier, vol. 184(C).
    • Handle: RePEc:eee:inteco:v:184:y:2025:i:c:s211070172500071x
    DOI: 10.1016/j.inteco.2025.100648
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    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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