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The Relationship Between Financial Development, Institutions Quality, and Income Inequality from the Sub-Saharan Africa Countries

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Abstract

This study examines the hypothesis that financial development (FD) not only affects income inequality (II), but the effects can also be improved when there is a higher institutional quality (IQ). It uses the System GMM method on a panel of 48 Sub-Saharan African (SSA) countries during the 1980–2018 period. When banking sector development indicators and institutions are used separately as independent variables, the reported coefficients are negative and significant. The findings indicate that (FD) decreases (II). However, institutional variables seem to provoke (II) and to deepen the gap between the poor and the rich. Estimating the interaction variables, our findings conclude that poor IQ may contribute to the increasing inequality by shifting the gains of (FD) to the hands of the rich. Policy implications are discussed.

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The data that support the findings of this study are available on request from the corresponding author.

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Funding

The authors acknowledge the financial support of the Deanship of Scientific Research at AlBaha University, Kingdom of Saudi Arabia. This article, which is part of the research project no. P21/1440, is developed within the framework of research Programs of Al-Bahah University.

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  1. College of Business Administration, Al-Baha University, Al-Baha, Kingdom of Saudi Arabia

    Abdullah Almounsor

  2. Ecole Supérieure de Commerce de Tunis (ESCT), Manouba University, Manouba, Tunisia

    Sami Mensi

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Appendix

Appendix

Table 7 List of SSA countries
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Table 8 Variables, definitions, and sources
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Table 9 Summary statistics (1980–2018)
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Table 10 Matrix correlation
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Almounsor, A., Mensi, S. The Relationship Between Financial Development, Institutions Quality, and Income Inequality from the Sub-Saharan Africa Countries. J Knowl Econ (2023). https://doi.org/10.1007/s13132-023-01510-7

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