Club Convergence in Income Inequality in Africa

Income inequality has become an issue of significant concern in Africa. And to provide insights into the evolution of inequality in the region, this paper investigates the convergence in income inequality across African countries. We employed a balanced panel of 34 countries covering from 2000 to 2014 and used the Gini index to represent income inequality in the study. The empirical results show a lack of support for overall convergence in income inequality, which means dispersion in income inequality increased over time across countries in the region. However, because convergence might still be found within the groups of countries with similar characteristics when overall convergence cannot be achieved, we further employed the club clustering algorithm to check whether club convergence exists. Our results show that income inequality converges into five convergence clubs and a group of divergence countries. And the evidence of club convergence means disparities in income inequality declined over time across countries within the club. The implication is that specific interventions targeting countries within each convergence club might be required to address the region’s inequality problem to achieve Sustainable Development Goals (SDGs). This includes employing direct taxes, transfers, or a combination to reduce African income inequality.