Urbanization, Economic Structure, Political Regime, and Income Inequality

The study examined the effect of urbanization on income inequality for 21 Sub Saharan African countries over the period 1984-2014 using heterogeneous panel estimation techniques. Based on the Pooled Mean Group and Common Correlated Effects Mean Group estimation techniques, the findings of the study do not support the Kuznets hypothesis. The results show that democratic reforms are negative and significantly related to income inequality. On the other hand, the share of agriculture in GDP and foreign direct investment do not have an independent robust effect on income inequality while GDP per capita, trade openness and urbanization have positive effects on income inequality. However, the findings show that institutional quality moderates the effect of urbanization on income inequality in the long-run.