Investigate asymmetry financial and technology development impacts on income inequality: Sub-Saharan African’s quest for economic growth

Abstract

Abstract Financial and technology development have the capability to increase output and/or productivity, innovations, and technology requires huge capital investment, and the cost of implementing new technology in developing countries is the challenge. This paper examines the impact of financial and technology development on income inequality in Sub-Saharan Africa (SSA) countries from 1995 to 2020. While financial and technological advancements have the potential to boost economic growth, implementing new technology requires significant capital investment and can be a challenge in developing countries. Additionally, equal distribution of the benefits of financial and technological progress is not guaranteed. To account for nonlinearities in the relationship between financial and technological development on income inequality, the paper uses a nonlinear panel ARDL model that allows for heterogeneity within countries. The results show that in the long run, financial and technology development have a significant positive impact on income inequality in SSA countries. However, the impact of positive technology on income inequality is negative, while both positive and negative financial shocks have a positive impact on income inequality. The results of this paper have important implications for policymakers and development practitioners in sub-Saharan Africa, where income inequality remains a significant challenge.