Bridging Africa’s income inequality gap: How relevant is China’s outward FDI to Africa?

Isaac K. Ofori, Marcel A.M. Dossou, Simplice Asongu and Mark K. Armah

Economic Systems, 2023, vol. 47, issue 1

Abstract: This study examines whether: (i) the remarkable inflow of Chinese FDI to Africa matters for bridging the continent’s marked income inequality gap, (ii) Africa’s institutional fabric is effective in propelling Chinese FDI towards the equalisation of incomes in Africa and (iii) there exist relevant thresholds required for the various governance dynamics to cause Chinese FDI to equalise incomes in Africa. Our results, which are based on the dynamic GMM estimator and macrodata for 48 African countries, reveal the following. First, although Chinese FDI contributes to fairer income distribution in Africa, the effect is weak. Second, although Africa’s institutional fabric matters for propelling Chinese FDI towards the equalisation of incomes across the continent, governance mechanisms for ensuring political stability, low corruption, and voice and accountability are critical. Finally, the critical masses required for these three key governance dynamics to cause Chinese FDI and other income inequality-reducing modules to reduce income inequality are 0.8, 0.5 and 0.1, respectively. These critical masses are thresholds at which governance is necessary but no longer sufficient to complement Chinese FDI to mitigate income inequality. Hence, at the attendant thresholds, complementary policies are worthwhile. Policy recommendations are provided in the conclusion.

Keywords: Africa; Agenda 2063; China; Corruption; Governance; FDI; Income inequality (search for similar items in EconPapers)
JEL-codes: F15 F6 O43 O55 R58 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0939362522001170
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Bridging Africa’s Income Inequality Gap: How Relevant Is China’s Outward FDI to Africa? (2021)
Working Paper: Bridging Africa’s Income Inequality Gap: How Relevant Is China’s Outward FDI to Africa? (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:47:y:2023:i:1:s0939362522001170

DOI: 10.1016/j.ecosys.2022.101055

Access Statistics for this article

Economic Systems is currently edited by R. Frensch

More articles in Economic Systems from Elsevier Contact information at EDIRC.
Bibliographic data for series maintained by Catherine Liu ().