IDEAS home Printed from https://ideas.repec.org/p/bge/wpaper/1000.html
   My bibliography  Save this paper

The Consumption, Income, and Wealth of the Poorest: An Empirical Analysis of Economic Inequality in Rural and Urban Sub-Saharan Africa for Macroeconomists

Author

Listed:
  • Leandro Magalhaes
  • Raül Santaeulàlia-Llopis

Abstract

We provide new empirical insights on the joint distribution of consumption, income, and wealth using cross-sectional and panel data from three of the poorest countries in the world—Malawi, Tanzania, and Uganda—all located in Sub-Saharan Africa (SSA). While income inequality in SSA is similar to that of the United States, consumption and wealth inequality are substantially lower in SSA. This gives rise to our two main findings for SSA: (i) a low transmission from income inequality to wealth inequality related to a low ability to accumulate wealth; and (ii) a low transmission from income inequality to consumption inequality related to a high ability to insure consumption. These results suggest a trade-off between accumulation and consumption insurance for SSA. Our results are more salient in the rural areas than in the urban areas of SSA.

Suggested Citation

  • Leandro Magalhaes & Raül Santaeulàlia-Llopis, 2017. "The Consumption, Income, and Wealth of the Poorest: An Empirical Analysis of Economic Inequality in Rural and Urban Sub-Saharan Africa for Macroeconomists," Working Papers 1000, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:1000
    as

    Download full text from publisher

    File URL: https://www.barcelonagse.eu/sites/default/files/working_paper_pdfs/1000.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Thorsten Beck & Asli Demirgüç-Kunt & Maria Soledad Martinez Peria, 2008. "Banking Services for Everyone? Barriers to Bank Access and Use around the World," World Bank Economic Review, World Bank Group, vol. 22(3), pages 397-430, November.
    2. Mark R. Rosenzweig & Christopher Udry, 2014. "Rainfall Forecasts, Weather, and Wages over the Agricultural Production Cycle," American Economic Review, American Economic Association, vol. 104(5), pages 278-283, May.
    3. Christopher D. Carroll, 1997. "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 1-55.
    4. Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante, 2010. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States: 1967-2006," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 15-51, January.
    5. Gharad Bryan & Shyamal Chowdhury & Ahmed Mushfiq Mobarak, 2014. "Underinvestment in a Profitable Technology: The Case of Seasonal Migration in Bangladesh," Econometrica, Econometric Society, vol. 82, pages 1671-1748, September.
    6. Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741 Elsevier.
    7. Chaoran Chen & Diego Restuccia & Raul Santaeulalia-Llopis, 2017. "The Effects of Land Markets on Resource Allocation and Agricultural Productivity," Working Papers tecipa-592, University of Toronto, Department of Economics.
    8. Greg Kaplan & Giovanni L. Violante, 2010. "How Much Consumption Insurance beyond Self-Insurance?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 53-87, October.
    9. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-346, April.
    10. Raul Santaeulalia-Llopis & Diego Restuccia, 2014. "Land Misallocation and Productivity," 2014 Meeting Papers 1314, Society for Economic Dynamics.
    11. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    12. Dirk Krueger & Fabrizio Perri, 2006. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory -super-1," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 163-193.
    13. Angus Deaton, 2005. "Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 1-19, February.
    14. Mark Bils & Mark Aguiar, 2010. "Has Consumption Inequality Mirrored Income Inequality?," 2010 Meeting Papers 1334, Society for Economic Dynamics.
    15. Oded Galor & Omer Moav, 2004. "From Physical to Human Capital Accumulation: Inequality and the Process of Development," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1001-1026.
    16. Vincenzo Quadrini, 2000. "Entrepreneurship, Saving and Social Mobility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 1-40, January.
    17. Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 2002. "Informal Insurance Arrangements with Limited Commitment: Theory and Evidence from Village Economies," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 209-244.
    18. Rosenzweig, Mark R & Wolpin, Kenneth I, 1993. "Credit Market Constraints, Consumption Smoothing, and the Accumulation of Durable Production Assets in Low-Income Countries: Investment in Bullocks in India," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 223-244, April.
    19. Beegle, Kathleen & De Weerdt, Joachim & Friedman, Jed & Gibson, John, 2012. "Methods of household consumption measurement through surveys: Experimental results from Tanzania," Journal of Development Economics, Elsevier, vol. 98(1), pages 3-18.
    20. Douglas Gollin & David Lagakos & Michael E. Waugh, 2014. "Agricultural Productivity Differences across Countries," American Economic Review, American Economic Association, vol. 104(5), pages 165-170, May.
    21. Attanasio, Orazio P, et al, 1999. "Humps and Bumps in Lifetime Consumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 22-35, January.
    22. Bruce D. Meyer & Wallace K. C. Mok & James X. Sullivan, 2015. "Household Surveys in Crisis," Journal of Economic Perspectives, American Economic Association, vol. 29(4), pages 199-226, Fall.
    23. Jessica Goldberg, 2016. "Kwacha Gonna Do? Experimental Evidence about Labor Supply in Rural Malawi," American Economic Journal: Applied Economics, American Economic Association, vol. 8(1), pages 129-149, January.
    24. Beegle, Kathleen & Carletto, Calogero & Himelein, Kristen, 2012. "Reliability of recall in agricultural data," Journal of Development Economics, Elsevier, vol. 98(1), pages 34-41.
    25. Juan Carlos Conesa & Sagiri Kitao & Dirk Krueger, 2009. "Taxing Capital? Not a Bad Idea after All!," American Economic Review, American Economic Association, vol. 99(1), pages 25-48, March.
    26. Kaminski, Jonathan & Christiaensen, Luc & Gilbert, Christopher L., 2014. "The end of seasonality ? new insights from Sub-Saharan Africa," Policy Research Working Paper Series 6907, The World Bank.
    27. Rosenzweig, Mark & Udry, Christopher, 2014. "Rainfall Forecasts, Weather and Wages over the Agricultural Production Cycle," Center Discussion Papers 162421, Yale University, Economic Growth Center.
    28. Raül Santaeulàlia-Llopis & Yu Zheng, 2018. "The Price of Growth: Consumption Insurance in China 1989–2009," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(4), pages 1-35, October.
    29. Deaton, Angus & Paxson, Christina, 1994. "Intertemporal Choice and Inequality," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 437-467, June.
    30. Angus Deaton, 2005. "ERRATUM: Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 395-395, May.
    31. Margaret Grosh & Paul Glewwe, 2000. "Designing Household Survey Questionnaires for Developing Countries : Lessons from 15 Years of the Living Standards Measurement Study, Volume 2," World Bank Publications, The World Bank, number 15194.
    32. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," American Economic Review, American Economic Association, vol. 92(2), pages 160-164, May.
    33. Abhijit Banerjee & Thomas Piketty, 2005. "Top Indian Incomes, 1922-2000," World Bank Economic Review, World Bank Group, vol. 19(1), pages 1-20.
    34. Rosenzweig, Mark R & Stark, Oded, 1989. "Consumption Smoothing, Migration, and Marriage: Evidence from Rural India," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 905-926, August.
    35. Kaivan Munshi & Mark Rosenzweig, 2016. "Networks and Misallocation: Insurance, Migration, and the Rural-Urban Wage Gap," American Economic Review, American Economic Association, vol. 106(1), pages 46-98, January.
    36. Lasse Brune & Xavier Giné & Jessica Goldberg & Dean Yang, 2016. "Facilitating Savings for Agriculture: Field Experimental Evidence from Malawi," Economic Development and Cultural Change, University of Chicago Press, vol. 64(2), pages 187-220.
    37. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1403-1448.
    38. Dirk Krueger & Fabrizio Perri & Luigi Pistaferri & Giovanni L. Violante, 2010. "Cross Sectional Facts for Macroeconomists," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 1-14, January.
    39. Buera, Francisco J. & Shin, Yongseok, 2011. "Self-insurance vs. self-financing: A welfare analysis of the persistence of shocks," Journal of Economic Theory, Elsevier, vol. 146(3), pages 845-862, May.
    40. Storesletten, Kjetil & Telmer, Christopher I. & Yaron, Amir, 2004. "Consumption and risk sharing over the life cycle," Journal of Monetary Economics, Elsevier, vol. 51(3), pages 609-633, April.
    41. David N. Weil & Oded Galor, 1999. "From Malthusian Stagnation to Modern Growth," American Economic Review, American Economic Association, vol. 89(2), pages 150-154, May.
    42. Alwyn Young, 2012. "The African Growth Miracle," Journal of Political Economy, University of Chicago Press, vol. 120(4), pages 696-739.
    43. Udry, Christopher, 1995. "Risk and Saving in Northern Nigeria," American Economic Review, American Economic Association, vol. 85(5), pages 1287-1300, December.
    44. Orazio P. Attanasio & Guglielmo Weber, 1993. "Consumption Growth, the Interest Rate and Aggregation," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 631-649.
    45. Margaret Grosh & Paul Glewwe, 2000. "Designing Household Survey Questionnaires for Developing Countries : Lessons from 15 Years of the Living Standards Measurement Study, Volume 3," World Bank Publications, The World Bank, number 15195.
    46. Carletto, Calogero & Savastano, Sara & Zezza, Alberto, 2013. "Fact or artifact: The impact of measurement errors on the farm size–productivity relationship," Journal of Development Economics, Elsevier, vol. 103(C), pages 254-261.
    47. Facundo Alveredo & Juliana Londoño Vélez, 2013. "High incomes and personal taxation in a developing economy: Colombia 1993-2010," Commitment to Equity (CEQ) Working Paper Series 1312, Tulane University, Department of Economics.
    48. Alwyn Young, 2012. "The African Growth Miracle," NBER Working Papers 18490, National Bureau of Economic Research, Inc.
    49. Per Krusell & Anthony A. Smith & Jr., 1998. "Income and Wealth Heterogeneity in the Macroeconomy," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 867-896, October.
    50. Caselli, Francesco, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics 3567, London School of Economics and Political Science, LSE Library.
    51. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941 Elsevier.
    52. David Lagakos & Benjamin Moll & Tommaso Porzio & Nancy Qian & Todd Schoellman, 2018. "Life-Cycle Human Capital Accumulation across Countries: Lessons from US Immigrants," Journal of Human Capital, University of Chicago Press, vol. 12(2), pages 305-342.
    53. David Lagakos & Michael E. Waugh, 2013. "Selection, Agriculture, and Cross-Country Productivity Differences," American Economic Review, American Economic Association, vol. 103(2), pages 948-980, April.
    54. Pascaline Dupas & Jonathan Robinson, 2013. "Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 163-192, January.
    55. Pascaline Dupas & Jonathan Robinson, 2013. "Why Don't the Poor Save More? Evidence from Health Savings Experiments," American Economic Review, American Economic Association, vol. 103(4), pages 1138-1171, June.
    56. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters,in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc.
    57. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
    58. Attanasio, Orazio & Rios-Rull, Jose-Victor, 2000. "Consumption smoothing in island economies: Can public insurance reduce welfare?," European Economic Review, Elsevier, vol. 44(7), pages 1225-1258, June.
    59. Angus Deaton & Salman Zaidi, 2002. "Guidelines for Constructing Consumption Aggregates for Welfare Analysis," World Bank Publications, The World Bank, number 14101, December.
    60. Javier Díaz-Giménez & Andrew Glover & José-Víctor Ríos-Rull, 2011. "Facts on the distributions of earnings, income, and wealth in the United States: 2007 update," Quarterly Review, Federal Reserve Bank of Minneapolis.
    61. Deininger, Klaus & Carletto, Calogero & Savastano, Sara & Muwonge, James, 2012. "Can diaries help in improving agricultural production statistics? Evidence from Uganda," Journal of Development Economics, Elsevier, vol. 98(1), pages 42-50.
    62. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    63. Ecker, Olivier & Qaim, Matin, 2011. "Analyzing Nutritional Impacts of Policies: An Empirical Study for Malawi," World Development, Elsevier, vol. 39(3), pages 412-428, March.
    64. Ana Castaneda & Javier Diaz-Gimenez & Jose-Victor Rios-Rull, 2003. "Accounting for the U.S. Earnings and Wealth Inequality," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 818-857, August.
    65. Paxson, Christina H, 1993. "Consumption and Income Seasonality in Thailand," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 39-72, February.
    66. Margaret Grosh & Paul Glewwe, 2000. "Designing Household Survey Questionnaires for Developing Countries," World Bank Publications, The World Bank, number 25338.
    67. Angus Deaton & Olivier Dupriez, 2011. "Spatial price differences within large countries," Working Papers 1321, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
    68. Facundo Alvaredo & Leonardo Gasparini, 2013. "Recent Trends in Inequality and Poverty in Developing Countries," CEDLAS, Working Papers 0151, CEDLAS, Universidad Nacional de La Plata.
    69. repec:wly:emetrp:v:82:y:2014:i:5:p:1671-1748 is not listed on IDEAS
    70. repec:pri:rpdevs:spatial_price_differences_in_large_countries-_10-jul_2011_complete is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    macroeconomy; consumption; income; Wealth; Sub-Saharan Africa; Inequality; cross-sectional data; panel data;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:bge:wpaper:1000. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bruno Guallar). General contact details of provider: http://edirc.repec.org/data/bargses.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.