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Does institutional quality matter in financial development and income inequality nexus? new evidence from Sub-Saharan Africa

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  • Valentine Soumtang Bime

    (University of Yaounde II)

  • Itchoko Motande Mondjeli Mwa Ndjokou

    (University of Maroua)

Abstract

The objective of this paper is to evaluate the effect of institutional quality on the financial development- income inequality nexus in Sub-Saharan Africa (SSA). To this end, we estimate a dynamic panel model using data from thirty-three (33) SSA countries between 1990 and 2018 through the generalized method of moments in system. To capture financial development, we use its fourth dimensions namely depth, efficiency, access and stability, and we construct a composite index using principal component analysis. We also use set of institutional quality indicators. The results show that the poor quality of institutions in SSA countries worsens the effect of financial development on income inequality overall. However, this effect is mitigated for financial efficiency. These results are consistent with the robustness tests. These results call for the implementation of programs to strengthen institutional quality in SSA countries.

Suggested Citation

  • Valentine Soumtang Bime & Itchoko Motande Mondjeli Mwa Ndjokou, 2023. "Does institutional quality matter in financial development and income inequality nexus? new evidence from Sub-Saharan Africa," Economics Bulletin, AccessEcon, vol. 43(3), pages 1395-1410.
    • Handle: RePEc:ebl:ecbull:eb-22-00717
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    More about this item

    Keywords

    Financial development; income inequality; institutional quality; Sub-Saharan Africa.;
    All these keywords.

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • G2 - Financial Economics - - Financial Institutions and Services

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