The impact of oil rent on income inequality in sub-Saharan African countries: role of political institutions

The relationship between oil rents and income inequality has gradually increased in recent decades. In this context, insights and evidence of the effects of oil rents on income inequality are important. This study investigates the potential effects of income inequality and political institutions in 12 sub-Saharan African countries from 1994 to 2019, using the common correlated effects pooled mean group (CCEPMG) method. Our baseline results reveal that oil rents increase income inequality in the long run. Furthermore, the nonlinear CCEPMG panel revealed that political institutions deepen the effect of increasing oil rent on income inequality in the short and long run. The direct effect of political institutions also shows that, in the short and long run, they increase income inequality. This study provides evidence that political institutions are effective ways to curb resource courses in the way of income inequality. One policy recommendation is for governments from sub-Saharan African countries to build more robust political institutions and promote more redistributive policies.