Inequality and the impact of growth on poverty in sub‐Saharan Africa: A GMM estimator in a dynamic panel threshold model

Abstract

AbstractThe need for a good understanding of the relationship among poverty, inequality, and economic growth has become a significant concern in poor countries. This paper, therefore, empirically analyzes the triangular relationship among extreme poverty, income inequality, and economic growth for the 45 middle and low‐income sub‐Saharan African countries over the period 2010–2021. This study examines the effect of economic growth in extreme poverty reduction, with emphasis on the role of income inequality. We found that the nexus between these three variables is nonlinear. Our empirical results show that the economic growth begins to reduce extreme poverty when income inequality is at or below a threshold of 35.28 for the low‐income countries and 45.15 for the middle‐income countries. Meanwhile, the results indicate that there is no relationship between economic growth and extreme poverty above the inequality threshold levels of 35.28 and 45.15 for the low‐income and the middle‐income countries, respectively. On the basis of the findings, this study proposes several policy recommendations.