Inequality, Finance and Pro-Poor Investment in Africa

African Governance and Development Institute WP/15/052

31 Pages Posted: 9 Jan 2016

See all articles by Simplice Asongu

Simplice Asongu

African Governance and Development Institute

Vanessa S. Tchamyou

African Governance and Development Institute

Date Written: December 31, 2015

Abstract

This study complements existing literature by investigating how investment-driven finance affects inequality in Africa. The empirical evidence is based on restricted and unrestricted Two-Stage Least Squares and a pre-crisis periodicity (1980-2002). Inequality is measured with estimated household income inequality whereas financial development is proxied with financial depth (money supply and liquid liabilities), financial efficiency (at banking and financial system levels), financial activity (from banking and financial system perspectives) and financial size. The findings show that with the exception of foreign investment, financial dynamics of depth, efficiency, activity and size enhance equalizing income-distribution through domestic, private and public investment channels. Policy implications are discussed with particular emphasis on improving inclusive development for the post-2015 sustainable development agenda. Notably, in the current transition from Millennium Development Goals (MDGs) to Sustainable Development Goals (SDGs), mobilizing domestic resources for investment purposes may have greater inclusive benefits than overly reliance on foreign sources of capital.

Keywords: Finance, Investment, Poverty, Inequality, Africa

JEL Classification: D60, E25, G20, I30, O55

Suggested Citation

Asongu, Simplice and S. Tchamyou, Vanessa, Inequality, Finance and Pro-Poor Investment in Africa (December 31, 2015). African Governance and Development Institute WP/15/052. Available at SSRN: https://ssrn.com/abstract=2713088 or http://dx.doi.org/10.2139/ssrn.2713088

Simplice Asongu (Contact Author)

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

Vanessa S. Tchamyou

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

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