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Capital flows and the distribution of income in sub-Saharan Africa

Samuel Adams and Edem Kwame Mensah Klobodu

Economic Analysis and Policy, 2017, vol. 55, issue C, 169-178

Abstract: In this study, we examine the differential effects of capital flows on the distribution of income in 21 sub-Saharan African (SSA) countries over the period 1984–2013. The empirical results show that FDI has a moderate positive effect on income inequality, which suggests that FDI increases income inequality in both the short and the long-run. Remittances, external debt and aid flows, however, do not have robust impact on income inequality. Further, our findings indicate unidirectional causality from FDI to income inequality in the short-run when we account for heterogeneity. Finally, our country-specific estimates indicate that capital flows have mixed effect on inequality in SSA.

Keywords: Aid; FDI; External debt; Income inequality; Remittances (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:ecanpo:v:55:y:2017:i:c:p:169-178