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The impact of informality on inclusive growth in Sub-Saharan Africa: Does financial inclusion matter?

Mary Amponsah, Frank W. Agbola and Amir Mahmood

Journal of Policy Modeling, 2021, vol. 43, issue 6, 1259-1286

Abstract: Rising poverty levels in Sub-Saharan Africa requires a better understanding of inclusive growth determinants to develop effective policy responses. Using panel data from 44 Sub-Saharan African countries for the period 1990–2018, we compute measures of inclusive growth based on gender and the rural–urban divide. We account for endogeneity, cross-sectional dependence, and heteroscedasticity, and estimate an inclusive growth model using the instrumental variable generalized method of moments (IV-GMM) estimator. The empirical evidence indicates that the impact of informality on inclusive growth depends on the measure of informality and inclusiveness. Our results show that financial inclusion exhibits an inverted-U-shaped relationship with inclusive growth. Also, we find that the moderating role of financial inclusion in the informality–inclusive growth nexus is mixed. Our results are robust to alternative model specifications and highlight the importance of financial inclusion and informality in influencing inclusive growth in Sub-Saharan Africa.

Keywords: Financial inclusion; Gender diversity; Inclusive growth; Informality; Rural–urban (search for similar items in EconPapers)
JEL-codes: E26 O11 O16 O18 O47 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jpolmod.2021.03.009

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