Closing the vicious poverty gap: the role of digital technology and financial progress in mitigating income inequality in sub-Saharan Africa

Zaiyang Li (), Hassan Swedy Lunku (), Shaohua Yang () and Jonathan Bakadila Ngoma ()
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Zaiyang Li: Xi’an Jiaotong University
Hassan Swedy Lunku: Xi’an Jiaotong University
Shaohua Yang: Xi’an Jiaotong University
Jonathan Bakadila Ngoma: Xi’an Jiaotong University

International Journal of Economic Policy Studies, 2025, vol. 19, issue 2, No 3, 299-332

Abstract: Abstract This paper investigates the entire distributional of causal effect by employing instrumental variables generalized quantile regression approach where multiple endogenous and instrument variables are applied in the estimator. Analysis of the dynamics of the sub-Saharan Africa (SSA) region income inequality provides a picture of disparate effects underlying the finance and digital development in the region on different tails of inequality. Results indicate that digitalization significantly impacts income inequality with financial developments in terms of access, efficiency, and depth of financial institutions and markets to different quantiles. Fixed telephone, mobile phone subscriptions, and internet adoption and use significantly reduce inequality in the region. The effectiveness and advancement of technology for financial institutions are mechanisms to lower inequality and the results imply heterogeneous impacts on income inequality and vary across different quantiles. Furthermore, the study highlights the potential of digital technology and financial progress in fostering inclusive growth, poverty reduction, and economic inclusion. We argued policymakers to intervene in the impact of digital and financial development in creating a more equitable economic landscape in SSA, ultimately contributing to sustainable development and reduced income disparities in the region.

Keywords: Finance; Digitalization; Income inequality; Quantile regression; O16; O30; O55; I16 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s42495-025-00153-7

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