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Sectoral Growth and Income Inequality in Sub-Saharan Africa: The Role of Fiscal and Monetary Policies

In: The Palgrave Handbook of Africa’s Economic Sectors

Author

Listed:
  • William Godfred Cantah

    (University of Cape Coast)

  • Eric Amoo Bondzie

    (University of Cape Coast)

  • Joshua Sebu

    (University of Cape Coast)

Abstract

Employing System Generalized Method of Moments, this chapter examines the interaction effects of sectoral value-added and fiscal and monetary policy on income inequality in 43 Sub-Saharan African countries during the 1996–2017 period. Results indicate that increased agricultural and industrial outputs reduce income inequality whereas increased service sector output increases inequality. However, an increase in taxes reduces the rate at which an increase in agricultural value-added reduces inequality while it increases the rate at which an increase in the industrial value-added reduces inequality. Similarly, an increase in money supply reduces the effect of an increase in agricultural and industrial value-added in reducing inequality. Thus, to reduce income inequality, policymakers should reduce taxes in the agricultural sector and compensate with an increase in taxes in the industrial sector.

Suggested Citation

  • William Godfred Cantah & Eric Amoo Bondzie & Joshua Sebu, 2022. "Sectoral Growth and Income Inequality in Sub-Saharan Africa: The Role of Fiscal and Monetary Policies," Springer Books, in: Evelyn F. Wamboye & Bichaka Fayissa (ed.), The Palgrave Handbook of Africa’s Economic Sectors, pages 897-918, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-75556-0_35
    DOI: 10.1007/978-3-030-75556-0_35
    as

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