The employment, growth and income inequality link: the economic significance of natural resources for Sub-Saharan Africa

High levels of income inequality and stagnant employment levels remain a major problem across Sub-Saharan Africa (SSA) in spite of unprecedented economic growth over the last two decades. With rampant income inequality across many countries in the region, the benefits of economic growth do not seem to trickle down to the population. This situation is further complicated with the difference in resource endowments across countries on the continent. The study thus investigates the employment and income inequality nexus by accounting for differences in resource endowments across SSA countries. The paper categorises countries into (i) oil exporters (ii) oil importers (iii) mineral exporters and (iv) mineral importers. Using the Generalised Methods of Moments technique on data from 2000 to 2016 in 42 countries, the findings first indicate a positive link between employment and income inequality. Once, we account for the differential in resource endowments, the results suggest that higher employment is essential in reducing income inequality in oil-rich, mineral-rich and mineral-poor economies while in oil-poor countries, employment does not have a significant impact on income inequality. In contrast, economic growth in resource-abundant economies, namely, mineral and oil abundant countries, aggravates income inequality, supporting the resource curse phenomenon whereby economies well-endowed with natural resources fail to have better economic performance than those without natural resources.