Does corruption foster income inequality in sub-Saharan African countries?

Abstract

The aim of this paper is to analyse the effect of corruption on income inequality for Sub-Saharan African (SSA) countries. To do so, the paper uses panel data covering the period 2002–2017, the Fractional Regression Method (FRM) as well as the Generalized Moment Method (GMM-two stage system) to highlight the effect of corruption on income inequality for 44 SSA countries. The results of the estimations show that with the FRM method the corruption perception index (CPI) is statistically significant and positively affects the GINI index which represents the income inequality indicator, and with the GMM method that better governance of states in terms of controlling corruption significantly reduces income inequality. The main contribution of this research is both academic and political. On the academic side, it fills the gap in the literature on the link between corruption and income inequality, particularly in SSA. On the policy side, the paper suggests that controlling the level of corruption in the public sector by the relevant institutions should be considered one of the most effective weapons in reducing income inequality in SSA countries. JEL Classification: O10 O43 P37