Rural-Urban Inequality in Africa: A Panel Study on the Effects of Trade Liberalization and Financial Depending

Mina Baliamoune and Stefan Lutz

Journal of African Development, 2005, vol. 7, issue 1, 1-19

Abstract: Using panel data from 39 countries, this paper examines the effects of financial deepening and openness to trade and foreign capital (FDI) on rural-urban inequality in Africa. Four estimations were performed: OLS pooled cross-section, GLS pooled cross-section, fixed effects model and an adjusted fixed effects specification with regional dummy terms. We construct an alternative measure of rural-urban inequality, namely the ratio of growth in agricultural output to growth of manufacturing output. Overall, the econometric results show that openness to trade seems to help reduce rural-urban inequality. However, the empirical evidence does not unambiguously delineate the nature and significance of the impact FDI and financial deepening have on the rural-urban gap. The findings imply that there may be some support for the so-called offsetting-trend in inequality (OTI) hypothesis.

Keywords: FDI; OLS; Financial deepening; Rural-urban inequality; openness to trade; GLS; Offsetting-trend in inequality; OTI (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (27)

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