The aim of this paper is to investigate the direction of causality between poverty, inequality and economic growth in Tunisia using time series data covering the period 1970-2013. We use in this paper the ARDL bound testing approach to cointegration and Toda and Yamamoto (1995) modification of the Granger causality test. The result of bound testing reveals that there is an evidence of long-run relationship among the variables. In long term, we conclude that there is a positive relationship between income inequality and poverty. However, in the short-run there is a positive relation between inequality and growth to poverty. The results of Toda and Yamamoto indicate that there is a unidirectional causal relationship running from economic growth to poverty. We, therefore, recommend that governments should intense efforts in reinforcement the economic growth and should pay attention on its sustainability. In addition, we found unidirectional causality between poverty and inequality. However, on the other hand, the results of this paper indicate a bidirectional causality between inequality and economic growth. Therefore, the political leaders should focus their efforts on the middle class and poorest to reduce inequality and, therefore, support the growth that can reduce poverty.

Purpose The purpose of this paper is to examine the relationship between foreign aid and income inequality (IIQ) reduction for 16 African countries using unbalanced panel data covering the period 1990–2011. This paper attempts to answer the critical question: does foreign aid lead to IIQ reduction? Design/methodology/approach To examine the effect of foreign aid on IIQ, this paper uses an RE model with robust OLS regression and system-GMM estimator, which are useful in dealing with the endogeneity problems. Findings Results of RE model indicate that foreign aid, foreign direct investment, trade openness as well as corruption have a positive and statistically significant effect on IIQ. Government spending and inflation have a negative and statistically significant effect on IIQ, while GDP per capita growth has a negative but statistically insignificant relationship with IIQ. The results are robust by using system-GMM dynamic panel model which confirms that the coefficients of all considered variables remain same sign and significance. Research limitations/implications This study implies that an increase in foreign aid is associated with an increase in IIQ. As an effective strategy to foreign aid, this paper suggests that improving of financial sector development, and institutional quality and policies can reduce income inequalities and stimulate economic growth. Originality/value This paper is the first of its kind to empirically explore the relationship between IIQ and foreign aid measured here by net aid transfers as a share of GDP in African countries, using modern econometric techniques, time period and a variety of control variables.

This paper examines the relationship between foreign aid (AID), foreign direct investment (FDI) and domestic investment (DI) and its effects on economic growth in 41 African countries. Annual panel data from 1990 to 2016 are examined using fixed-effects (FE) and system-GMM estimators. We test the existence of nonlinearities and complementarities in the relationship between AID-FDI, AID-DI, FDI-DI, and AID-FDI-DI. Empirical results confirm the existence of a nonlinear relationship between AID, FDI, DI, and economic growth. Besides, the results show that AID and FDI have a significant positive complementing effect on economic growth. It is shown also that FDI complements DI, while the coupled effect of AID and DI remains weak in catalyzing growth. Moreover, the results indicate that the complementarity between AID-FDI-DI positively influence economic growth, revealing that AID and FDI work as a complement factor to DI and enhance its effectiveness in promoting economic growth. These insights have important policy implications. Policy-makers in African countries are well advised to implement concrete policy measures suitable for building on the growth momentum created by foreign capital inflows, like FDI, AID as well as remittance. countries to recipient countries, which include both grants and loans from bilateral and multilateral official agencies, are considered as important sources of funds for capital expenditures and could contribute to the immiserizing growth of developing countries (Tim et al., 2004). However, the interaction between AID, FDI, and DI is considered the topic to be studied in developing economies. While, FDI inflows to developing economies remains stable, growing to $706 billion, with significant differences among regions, Africa recorded the largest amount ($45.5 billion) of FDI flows in 2016 (UNCTAD, 2016). The rise in FDI was mainly due to the continuance of resource-seeking investments, and a more than doubling of FDI flows to South Africa (from $2.0 billion to $5.3 billion). Similarly, about AID, it is shown that official development assistance (ODA) receipts of developing countries increased significantly during the decade of the 2000s. However, based on AID recipient data, Africa recorded the highest ($49,954 million) of net ODA recipients in 2016, following by Asia with $43,516 million (World Bank, 2016). Against this background, net flows of ODA continue to be distributed more evenly across different developing countries than other official flows, such as FDI. This is true, despite the fact that donors' aid allocation is not only affected by country needs, but also by additional factors ranging from geopolitical considerations to historical and cultural ties, especially in the case of bilateral flows (Alesina & Dollar, 2000; Anderson, 2008). Though the literature is full of studies investigating the impacts of AID, FDI, and DI on economic growth, it is still inconclusive, with differences in empirical findings in terms of set of countries, data and estimation techniques. While there i...