Income Inequality and Energy Consumption in Sub-Sahara Africa: A Nonlinear Process

Purpose: This study examines the nexus between income inequality and energy consumption in sub-Sahara Africa, using non-linear approach. The objective of the study is to determine the effects of income disparity on energy consumption, given the environmental repercussions. Design/Methodology/Approach: The study adopted econometric methodology involving panel non-linear auto regressive distributed lag (PNARDL) model. Data spanning 1980–2015 on twenty-five countries were collected from Standard World Income Inequality Database for the income inequality indicator and World Development Indicators for other variables. Pesaran (J Appl Economet 22:265–312, 2007) covariate-augmented Dickey Fuller (CADF) unit root test was used to determine the stationarity of the series and Westerlund (Oxford Bull Econ Stat 69:709–748, 2007) panel co-integration test was employed for co-integration association. In two different models, both pool mean group (PMG) and mean group (MG) estimators were employed to determine the long-run and short-run effects of income inequality on energy consumption in SSA. Finally, Hausman (1978) test statistic provided the most appropriate and efficient estimator between the MG and PMG estimators. Findings: The results showed that, both in the long-run and short-run estimations, positive shocks to income inequality (0.70; 0.78% and 0.75; 0.14%) had a significant negative effect on energy consumption, while the negative shocks to income inequality (0.52; 0.62% and 0.15; 0.14%) had positive and insignificant effect on energy consumption in the region during the reference period. Practical Implications: To avert environmental degradation and natural disasters such as flooding, climate pollution and epidemics resulting from households’ deprivation of clean and sustainable energy use in the region, adequate investments must be made to stem the current trends of income inequality. Social Implications: Income inequality in SSA should be addressed as a matter of urgency by authorities to ensure social and economic development in the region. Originality and Value: This study advances frontier of knowledge by providing empirical evidence on asymmetric relationship found between income inequality and energy consumption in relation to environmental consequences in the SSA.