The Relationship Between Income Inequality And Economic Growth In Sub-Saharan Africa: Panel Data Analysis

Abstract

The purpose of this study was to examine the relationship between income inequality and economic growth of Sub Saharan Africa for the period 2002–2023. Twenty-two years Panel data was obtained from world development index. Data were analysed using descriptive statistics and econometric models. The Housman specification test is a test used to choose between the fixed effect model and random effect models. To determine the relationship between income inequality and economic growth in Sub-Saharan Africa by including others variables like Population growth, GINI index, openness, life expectancy, fertility rate, school enrolment and gross saving, random effect model was applied. Accordingly, explanatory variables that are incorporated in this study population growth; Gini-coefficient, trade openness, and gross saving were positively and significantly influenced economic growth of Sub- Saharan African countries. However, life expectancy, fertility rate and education have no relationship between income and economic growth of Sub Saharan Africa. It is recommended that policymakers prioritize investments in education and skills development to support a growing workforce. It also suggests strategies to reduce trade barriers, encourage exports, and attract foreign investment to capitalize on trade opportunities. Furthermore, the study emphasizes the importance of boosting savings through both public and private efforts, alongside developing a strong financial sector. To tackle income inequality, the study proposes direct cash transfers and government-provided essential goods and services