Structural transformation—Income inequality nexus in Africa: Does the Developer's dilemma hold?

Abstract

This article examines the developer's dilemma—a seeming quandary emerging from the fact that developing countries simultaneously pursue two different developmental goals: (a) seeking economic development through structural transformation and (b) reducing income inequality. However, the proclivity of increasing income inequality while pursuing structural transformation is often referred to as the developer's dilemma. This study investigates for the presence of this dilemma in Africa using sample splitting and threshold estimation technique. While we find support for the existence of a developer's dilemma, suggesting that structural transformation induces income inequality, the income inequality‐widening effect is disproportionate.

Trade openness, FDI, and income inequality: Evidence from sub‐Saharan Africa

“…Their following findings show that digital education could contribute to reducing inequality in Africa. By conducting a study on the relationship between structural transformation and income inequality in Africa, Ibrahim et al (2020) found that structural transformation contributes to exacerbating income inequality in the selected countries. Also, the relationship between growth, inequality and poverty has been investigated by Fosu (2015).…”

“…Four, to the best of our knowledge, the extant literature on inequality in Africa has fundamentally focused on 15 main strands, notably: the determinant of income inequality (Anyanwu, 2016; Bigsten, 2016); the relationship between economic structure, growth, and evolution of inequality and poverty (Fosu (2018); the relationship between inequality, information and communication technology (ICT), and financial access (Tchamyou et al, 2019a); the effect of ICT, education and lifelong learning on income inequality and economic growth (Tchamyou et al, 2019b); the nexus between inequality, poverty and growth (Fosu, 2015); the relationship between FDI and inequality (Kaulihowa & Adjasi, 2018); the relationship between inequality, ICT and inclusive education (Asongu et al, 2019); the linkage between inequality, gender inclusion and ICT (Asongu & Odhiambo, 2019c); the nexus between inequality, governance and gender economic inclusion (Odhiambo & Asongu, 2020); the relationship between education, lifelong learning, inequality and financial access (Tchamyou, 2018); the relationship between finance, inequality and inclusive education (Asongu et al, 2020); the effect of finance and CO 2 emissions thresholds on inequality (Asongu & Vo, 2020); the relationship between structural transformation and income inequality (Ibrahim et al, 2020) and the impact of mobile phone penetration on African inequality (Asongu, 2015). Thus, the relationship between trade openness, FDI and inequality is missing in contemporary African inequality literature.…”

FDI and inequality in Sub-Saharan Africa: does democracy matter?

“…Thus, Fayad et al (2012) reports that resource-dependent SSA countries suffer from a democratic deficit while more diversified countries adhere to the Modernization Hypothesis (Lenski, 1966;Tsai, 1995). Bigsten (2016) and Shimeles and Nabassaga (2018) argue that inequality in SSA is shaped by ethnic fragmentation, colonial history and limited education opportunities, and thus Ibrahim et al (2020) conclude that structural transformation worsens inequality in the region.…”