Is Africa’s Current Growth Reducing Inequality? Evidence from Some Selected African Countries

Is Africa’s current growth reducing inequality? What are the implications of growth on output performances in Africa? Does the effect of Africa’s growth on sectorial output have any implication for inequality in Africa? The study investigates the effect of shocks on a set of macroeconomic variables on inequality (measured by life expectancy) and the implication of this on sectors that are perceived to provide economic empowerment in form of employment for people living in the African countries in our sample. Studies already find that growth in many African countries has not been accompanied with significant improvement in employment. Therefore inequality is subject to a counter cyclical trend in production levels when export destination countries experience a recession. The study also provides insight on the effect of growth on sectorial output for three major sectors in the African economy with the intent of analyzing the impact of growth on sectorial development. The method used in this study is Panel Vector Autoregressive (PVAR) estimation and the obvious advantage of this method lies in the fact that it allows us to capture both static and dynamic interdependencies and to treat the links across units in an unrestricted fashion. Data is obtained from World Bank (WDI) Statistics for the period 1985 to 2012 (28 years) for 10 African Countries. Our main findings confirm strong negative relationship between GDP growth and life expectancy and also for GDP and the services and manufacturing sector considering the full sample.