Assessing the Effect of Inequality on Sectoral Economic Growth in Sub-Saharan Africa

Abstract

Inequality has received much attention over the recent years due to its numerous effects on growth in an economy. Existing studies on the effects on inequality have been widely documented especially on economic growth. However, most of these studies have focused on inequality and economic growth at the aggregate level, while little consideration is given to sectoral growth. Therefore, this paper examines the relationship between inequality and growth in the agriculture, manufacturing, and service sectors for the sub-Saharan Africa region. The study employed the Ordinary Least Squares regression model on pooled crosssectional data from 30 SSA countries with their most recent available data. The results revealed that a significant negative relationship exists between inequality and growth in the manufacturing sector. On the other hand, a negative non-significant relationship was found between inequality and agricultural growth and a positive insignificant relationship for the service sector. Ultimately, the significant negative relationship found implies that in the presence of high inequality, growth in the manufacturing sector is reduced. Hence, in the fight against inequality, policy makers and government bodies must gear their redistributive and welfare efforts more towards the manufacturing sector.