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The Role of Institutions in the Finance-Inequality Nexus in Sub-Saharan Africa

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  • Ngozi Adeleye
  • Evans Osabuohien
  • Ebenezer Bowale

Abstract

This study contributes to the literature on income inequality by providing evidence that financial development not only impacts income distribution, but the effects can improve when there is a strong institutional framework. Using the system-generalised method of moments (sys-GMM) technique on a sample of 42 Sub-Saharan African (SSA) countries from 1996 to 2015, our major findings are summarised as follows: (1) inequality is persistent in the region (2) financial development does not significantly reduce income inequality; and (3) the control of corruption and its interaction with domestic credit exhibit an inverted-U relation with income inequality. Thus, policies that will reduce income inequality require that corruption be controlled given increase in domestic credit.

Suggested Citation

  • Ngozi Adeleye & Evans Osabuohien & Ebenezer Bowale, 2017. "The Role of Institutions in the Finance-Inequality Nexus in Sub-Saharan Africa," Journal of Contextual Economics (JCE) – Schmollers Jahrbuch, Duncker & Humblot, Berlin, vol. 137(1-2), pages 173-192.
    • Handle: RePEc:dah:aeqjce:v137_y2017_i1-2_q1-2_p173-192
    DOI: 10.3790/schm.137.1-2.173
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    More about this item

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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