- Title
- Inclusive growth, income inequality and poverty reduction in Sub-Saharan Africa. Three empirical essays
- Creator
- Amponsah, Mary
- Relation
- University of Newcastle Research Higher Degree Thesis
- Resource Type
- thesis
- Date
- 2021
- Description
- Research Doctorate - Doctor of Philosophy (PhD)
- Description
- The objective of this thesis is to investigate the relationship between inclusive growth, income inequality and poverty reduction in Sub-Saharan Africa (SSA). For many developing countries, poverty alleviation continues to be a pervasive issue. Despite efforts to reduce poverty, developing countries, particularly in SSA, continue to experience growing income inequality and unstable economic growth, resulting in the prevalence of poverty across the region. A recent report by the World Bank states that, despite the international community’s efforts to alleviate poverty globally, poverty in SSA appears to be rising. Even where some countries in SSA have experienced significant economic growth, this has failed to address the problems of income inequality and poverty. Further, a critical review of the poverty literature reveals that the growing income inequality and poverty in the region may be attributed to the lack of inclusiveness of the poor because of the gender and rural–urban divide. Despite its relevance, the literature on inclusive growth is often critical of its effectiveness in fostering equitable income distribution and poverty reduction. In this thesis, inclusive growth refers to growth that ensures individual participation, contribution and benefits from the growth process; hence the focus is on job-based inclusive growth. Proponents of inclusive growth argue that increasing income inequality hinders the responsiveness of inclusive growth to alleviate poverty. At the same time, several studies have suggested that the impact of income inequality on inclusive growth depends on a country’s available resources. These conflicting predictions from the theoretical and empirical literature about the interrelationship between poverty, income inequality and inclusive growth have motivated the current thesis. This thesis consists of three empirical studies. The first empirical study investigates the key determinants of inclusive growth in the aggregate and across income groups in SSA. The study emphasises the need to incorporate informal employment and its sub-dimensions into an inclusive growth model to better understand the impact of informality on inclusive growth. Using comprehensive panel data for the period 1990–2018, the study breaks new ground by computing inclusive growth measures based on productive employment across genders and the rural–urban divide, and examining the impact of financial inclusion and informality on inclusive growth in SSA. After controlling for country- and time-fixed effects and endogeneity, the empirical results from the Instrumental Variable Generalised Method of Moments (IV-GMM) are fourfold. First, financial inclusion positively affects inclusive growth in SSA; however, there is a threshold beyond which this effect becomes negative. Second, the impact of informality on inclusive growth is inconclusive and depends on the dimension of informality. Third, the moderating impact of financial inclusion on the informality – inclusive growth nexus is also mixed and depends on the measurement of informality, the level of financial inclusion and a country’s development. Finally, the results indicate that increases in real gross domestic product (GDP) per capita, human capital, trade openness and governance enhance inclusive growth, while government expenditure and inflation impede inclusiveness. The second empirical study examines the growth effect of income inequality on inclusive growth. In particular, the transmission channels that influence the income inequality – inclusive growth nexus are analysed. Using the newly computed inclusive growth measure and improved income inequality data, the study employs a panel dataset for the period 1990–2018 and the IV-GMM, which accounts for endogeneity and country heterogeneity inherent in panel data for analysis. The choice of transmission channels and macroeconomic factors is guided by theoretical and empirical literature. The empirical results show that the impact of income inequality on inclusive growth is inconclusive and depends on the measurement used, transmission channel and time dimension. Further, the results show that income inequality affects inclusive growth positively through human capital, financial access, political stability and domestic savings, but negatively through foreign aid, fertility and population-related channels. These findings vary across income groups, highlighting the importance of countries’ resources for the predictive impact of income distribution in achieving an inclusive growth strategy in SSA. The third empirical study analyses the interrelationship between poverty, income inequality and inclusive growth in SSA, both in the aggregate and across income groups. The study employs a comprehensive panel dataset for the period 1990–2018 and the IV-GMM estimator to analyse the poverty–income inequality–inclusive growth nexus and whether inclusive growth moderates the income inequality–poverty nexus. Accounting for country heterogeneity and time-fixed effects, the empirical results are threefold. First, an increase in income inequality worsens poverty, and poverty reduces inclusive growth; however, poverty decreases when growth is inclusive. Second, an increase in inclusive growth does not have a clear and direct impact on income inequality so far as a non-linear relationship is concerned. Third, inclusive growth dampens the adverse impact of income inequality on poverty. These results are consistent with alternative model specifications across income groups and the data span, highlighting the urgent need for an inclusive growth strategy for poverty reduction in SSA. The thesis makes three significant contributions to policy. The first empirical study contributes to the inclusive growth literature by highlighting the importance of policies that take gender and rural–urban diversity into account in promoting inclusive growth in SSA. Unlike previous studies that have focused on the determinants of inclusive growth, this study found that an increase in informal paid jobs and financial inclusion enhance inclusive growth in SSA. Therefore, policies designed to strengthen informality should promote paid jobs, access to finance, labour market training and guaranteed employment schemes (i.e., protection rights, particularly during times of crisis) since these could reduce the adverse impacts of informality on inclusive growth. In line with the evidence that financial inclusion serves as a safety net mechanism to stimulate inclusive growth, there is an urgent need to vary financial packages to ensure affordability and accessibility by the citizenry to improve their livelihoods towards inclusiveness. The second empirical study contributes to the theoretical debate on the transmission channels that influence the impact of income inequality on inclusive growth. In this study, the evidence presented shows that the non-monotonic relationship between inclusive growth and income inequality results from the relative differences in a country’s resources. Therefore, there is a need for government to provide quality education by investing in the human capital and the workforce required by the job market. This would necessitate curriculum reform to focus on skill acquisition, provision of resources required for teaching, and workplace training. Further, policies to improve income distribution should include improved and affordable access to financial opportunities and effective governance to ensure political stability and resource distribution to all sectors of the economy. Lastly, the third empirical study contributes to theory by providing new evidence on the interrelationship between poverty, income inequality and inclusive growth. The evidence implies that policies to alleviate poverty through inclusive growth could be better designed by considering gender diversity and the rural–urban divide in the ever-changing global market economy. Since income inequality worsens poverty across SSA, policy instruments to tackle income inequality should include structural reforms that improve access to employment opportunities, finance, quality education, social investments, land and property rights, especially for the poor in rural and urban areas.
- Subject
- inclusive growth; income inequality; poverty reduction; financial inclusion; informality
- Identifier
- http://hdl.handle.net/1959.13/1426613
- Identifier
- uon:38443
- Rights
- Copyright 2021 Mary Amponsah
- Language
- eng
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| Thumbnail | File | Description | Size | Format | |||
|---|---|---|---|---|---|---|---|
| View Details Download | ATTACHMENT01 | Thesis | 4 MB | Adobe Acrobat PDF | View Details Download | ||
| View Details Download | ATTACHMENT02 | Abstract | 282 KB | Adobe Acrobat PDF | View Details Download |