What interaction between income Inequality and Structural Transformation in Sub-Saharan Africa

Abstract

Abstract The aim of this article is to study the interaction between income inequality and structural transformation in Sub-Saharan Africa. Using a sample of 18 countries over the period 1996-2015, we successively perform the panel causality test in the Granger sense developed by Dumitrescu and Hurlin (2012) and Juodis et al. (2021) on income inequality and Overall labor productivity, inter industry productivity (structural change effect), and finally intra industry productivity (internal or intra effect). The empirical results show that income inequality is at the root of structural transformation and labor productivity in Sub-Saharan Africa. This confirms the contemporary view that income inequality benefits development by acting as an incentive or means of self-transcendence. At the same time, we find that migration of both highly-skilled and unskilled workers leads to income inequalities between native and migrant workers internationally, and between rural and urban workers within countries.