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The Consumption, Income, and Wealth of the Poorest: Cross-Sectional Facts of Rural and Urban Sub-Saharan Africa for Macroeconomists

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  • Leandro De Magalhães
  • Raül Santaeulàlia-Llopis

Abstract

This paper provides new empirical insights on the joint distribution of consumption, income, and wealth (CIW) in three of the poorest countries in the world - Malawi, Tanzania, and Uganda - all located in sub-Saharan Africa (SSA). Our first finding is that while income inequality is similar to that of the United States, wealth inequality is barely one-third that of the US. Similarly, while the top of the income distribution (1-10%) earns a similar share of total income in SSA as in the United States, the share of total wealth accumulated by the income-rich in SSA is one-fifth of its US counterpart. Our main contribution is to i) document this dwarfed transmission from income to wealth, which suggests that SSA households face a larger inability to save and accumulate wealth compared with US households; and ii) document a lower transmission from income to consumption inequality, which suggests the presence of powerful institutions that favor consumption insurance in detriment of saving. These features are more relevant for rural areas, which represent roughly four-fifths of the total population. We identify the few successful pockets of the SSA population that are able to accumulate wealth by exploring sources of inequality such as age, education, migration, borrowing ability, and societal systems.

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  • Leandro De Magalhães & Raül Santaeulàlia-Llopis, 2015. "The Consumption, Income, and Wealth of the Poorest: Cross-Sectional Facts of Rural and Urban Sub-Saharan Africa for Macroeconomists," Bristol Economics Discussion Papers 15/655, School of Economics, University of Bristol, UK.
  • Handle: RePEc:bri:uobdis:15/655
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    Cited by:

    1. Alexander Monge-Naranjo & Juan M. Sánchez & Raül Santaeulàlia-Llopis, 2019. "Natural Resources and Global Misallocation," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(2), pages 79-126, April.
    2. Raul Santaeulalia-Llopis & Diego Restuccia, 2014. "Land Misallocation and Productivity," 2014 Meeting Papers 1314, Society for Economic Dynamics.
    3. Alessandra Voena & Lucia Corno, 2015. "Selling daughters: age at marriage, income shocks and bride price tradition," 2015 Meeting Papers 1089, Society for Economic Dynamics.

    More about this item

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • 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

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