What interaction between income inequality and structural transformation in Sub-Saharan Africa?

The objective of this paper is to study the interaction between income inequality and structural transformation in sub-Saharan Africa. Using a sample of 18 countries over the period 1996–2015, we successively run the Granger panel causality test developed by Dumitrescu and Hurlin (Empirical Economics, 60(1), 93-112, 2021) and Juodis et al. (Empirical Economics, 60(1), 93-112, 2021) between income inequality and aggregate labour productivity, inter-industry productivity (structural change effect), and finally intra-industry productivity (domestic effect). The empirical results show that income inequality is at the root of structural change and labour productivity in sub-Saharan Africa. This confirms the current view that income inequality is conducive to development by acting as an incentive or a means of self-transformation. At the same time, we find that migration of both highly skilled and unskilled workers leads to income inequalities between native and migrant workers internationally, and between rural and urban workers within countries. As labour migration is both a cause and a solution to income inequality in sub-Saharan Africa, we call on governments around the world to manage labour migration in ways that reduce national and international administrative costs. We also encourage access to quality education and training programmes that give people in sub-Saharan Africa the skills they need to access better-paid jobs around the world.