The nexus between globalization, income inequality and economic growth: the experience of Sub-Saharan African countries

Abstract

Abstract The aim of this research is to assess the effects of income inequality and globalization on economic growth in Sub-Saharan Africa. The analysis is based on a panel VAR model of 42 countries. This approach was chosen because of the presence of endogenous variables in the model. The results show that the countries in the sample are not converging at the same pace, but are distinguished by different growth dynamics. Income inequality and economic growth are driving globalization in Sub-Saharan Africa. Income inequality favours economic growth and globalization in sub-Saharan Africa. A globalization shock has a negative impact on income inequality in the short term, but this effect begins to diminish after three years. We recommend that Sub-Saharan African countries take strong policy initiatives to break out of the "poverty trap" and create conditions conducive to higher growth rates in order to reap the benefits of globalization. JEL Classification: C33, F02, D30, O57