Growth is Good for the Poor: Panel Data Evidence from Africa

From the period immediately after the great depression to date, the world economy as a whole has experienced tremendous growth. However, the growth has largely been uneven. Globally, inequality levels have increased both within and between countries. Although globalisation has brought tremendous economic growth worldwide, it has also brought with it increased poverty and inequality, particularly in the poorest developing economies. Nevertheless, opinions remain sharply divided in the economic, social and political spheres regarding the role that growth plays on poverty and income inequality. The controversy in the literature is vast. While one group of studies in the extant literature find growth to increase inequality, another group argue that growth reduces inequality. This study contributes to this debate and finds evidence in support of the second strand of the literature which argues that growth reduces inequality. Specifically, we use panel data to empirically examine the growth-inequality nexus and find evidence that economic growth reduces poverty and inequality in Africa.