The Nexus between Poverty, Inequality and Growth: A Case Study of Cameroon and Kenya

Abstract

Abstract We conduct an in-depth analysis of the nexus between inequality of opportunity and inclusive growth in Cameroon and Kenya employing cross-sectional data collected over two time periods in each country. Empirical results show that changes in education, health and labour market endowments have large effects on household economic well-being, as proxied by total expenditures per adult equivalent. Employing the regression-based decomposition, we find that effort-based variables are associated with greater Gini inequality compared with circumstance-based variables—more so for Cameroon than Kenya. Among the effort-based variables, education in Cameroon and health in Kenya, are the main correlates of income inequality. The factual and counterfactual distribution analyses undertaken demonstrate that equalisation of human capital endowments is strongly inequality-reducing and further promotes pro-poor growth. Meanwhile, elimination of circumstance disparities in Cameroon reduces Gini inequality, enhances pro-poorness of the growth process, promotes shared-prosperity in urban areas and reduces inequality between the tails of the distribution of well-being. In Kenya, elimination of circumstance-based disparities is pro-poor improving, shared prosperity enhancing, but Gini inequality augmenting. In contrast to the Cameroonian case, equalisation of circumstances increases inequality between the tails of the distribution of well-being. The mechanisms behind these findings are probably the country-specific redistributive policies.