Wealth Distributional Impacts of Structural Change in Africa

Abstract

Inequality has been a persistent challenge in Africa, drawing significant attention from the international community. Structural transformation is often proposed as a promising pathway to development for the continent. This study empirically investigates the causal connection between structural change and wealth inequality across 50 African countries during the period 2010 to 2020. Employing a two-step system generalized method of moments; key findings reveal that the agriculture sector's value-added significantly reduces wealth inequality, while the industry and manufacturing sectors show no statistically significant impact. Conversely, the service sector's value-added exacerbates inequality. Additionally, telephone subscriptions per 100 people emerge as crucial in mitigating wealth inequality, highlighting the role of digital connectivity. The study also emphasizes the persistence of wealth inequality, suggesting its tendency to perpetuate once established. These findings underscore the importance of policies aimed at bolstering agricultural productivity, expanding access to telecommunications, and reforming the service sector, while addressing the entrenched nature of inequality across the continent.