The effects of natural resource rents on income inequality in Sub-Saharan Africa: Is the informal economy a curse or a blessing?

Relwendé Sawadogo and Youmanli Ouoba ()
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Youmanli Ouoba: Université Thomas SANKARA

Economics Bulletin, 2024, vol. 44, issue 3, 832 - 846

Abstract: The informal sector plays an important role in resource-rich countries in Sub-Saharan Africa. However, previous works have not considered this sector as a link between natural resources and income inequality. Our study intends to fill this gap by applying a finite mixture model to 30 sub-Saharan African countries over the 2005-2020 period. The data outlined two regimes from countries associated with two important results. First, we found that natural resource rents are positively related to income inequality in the first regime, while in the second regime, natural resource rents are negatively associated with income inequality. Second, countries with significant informal economies are less likely to be in a regime where natural resource rents negatively affect income inequality.

Keywords: Natural resources; Income inequality, Informal economy; Finite mixture model Sub-Saharan Africa (search for similar items in EconPapers)
JEL-codes: D3 Q0 (search for similar items in EconPapers)
Date: 2024-09-30
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