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

Abstract

The motivation for this study stems from the United Nations Sustainable Development Goals (UN-SDGs) and their impact by 2030. The UN highlights 17 SDGs that address pertinent local and global issues, one of which-SDG-10-has been devoted to reducing inequality. This study investigates the nexus between trade openness, foreign direct investment (FDI), and income inequality in sub-Saharan Africa using panel data from 2000 to 2015 and the generalized method of moment (GMM) technique approach. The findings show that FDI and income have a negative, statistically significant relationship with income inequality, signifying that as FDI and income per capita increase, the level of income inequality decreases. However, trade openness, education, political stability, corruption, and rule of law have a positive, statistically significant relationship with inequality. This study, therefore, offers some recommendations that will help policymakers. First, develop good policies to attract more foreign investors, which will contribute to creating employment opportunities in the region. Second, create more infrastructures to provide good quality education. Third, implement a good policy to motivate local production which will contribute to creating jobs. Fourth, build a strong institution(s) to fight against corruption.

Towards the quest to reduce income inequality in Africa: is there a synergy between tourism development and governance?

“…The results reveal that the lag of Palma ratio has a positive and statistically significant effect on current levels of income inequality, meaning that income inequality still persists in Africa. This corroborates the findings ofXu et al (2021) in a study covering 38 sub-Saharan African countries. The results also show that economic globalisation has a positive and statistically significant effect on income inequality, meaning that enhanced economic integration like the AfCFTA, induces income inequality.…”

“…Similarly, Adams and Akobeng (2021) and Adeleye et al (2019) also provide empirical evidence in the case of Africa to show that quality governance provides a conducive setting to propel sectors such the telecommunication, finance, and hospitality to reduce income inequality. Finally, studies such as Xu et al (2021) and Canh et al (2020) argue that the weak institutional fabric of the developing world worsens income inequality. Overall, a conspicuous lacuna in the literature survey reveals that the tourism development-governance pathway towards the equalisation of incomes, especially in the developing world, has not been explored.…”

An Asymmetric Investigation of Remittance and Trade Openness Impact on Inequality: Evidence From Selected South Asian Countries

“…Trade openness accelerates the speed of income inequality negative associations (see Milanovic, 2005;Bucciferro, 2010;Castilho et al, 2012;Bayar and Sezgin, 2017;Dilara and Çigdem, 2021;Xu et al, 2021). The effect of trade openness on inequality is adverse due to several inherent economic attributes, such as wellendowed capital.…”

“…Another line of empirical studies available in explaining the positive association is that trade openness assists in reducing income inequality in the economy (Dagdemir, 2008;Vollrath, 2009;Székely and Sámano, 2012;Khan and Bashir, 2013;Wahiba, 2015;Andersson and Palacio Chaverra, 2016;Yenipazarli and Kucukkaya, 2016;Andersson and Palacio, 2017;Topuz and Dagdemir, 2020;Topuz and Dagdemir, 2020;Xu et al, 2021).…”

Risk, uncertainty and the tourism sector of North Africa

“…The present study is unique in many respects. First, most studies investigate the impact of international remittances (Akçay & Karabulutoğlu, 2021), trade (Umulisa, 2020), trade openness (Xu et al, 2021), foreign aid (Yahyaoui & Bouchoucha, 2021), foreign direct investment (Younsi et al, 2021), and so forth, on the African countries. But, how risk and uncertainty affect a particular group of African countries (North African countries) via the tourism sector is overlooked in the literature.…”