Analysis of Economic Growth and Kuznets Hypothesis: Testing for Evidence from Sub-Saharan Africa

Abstract

As SSA countries strive towards growth, certain challenges are inevitable. Minimizing these challenges could go a long way to speed up the process of growth. One of those challenges is income inequality. The theory that addresses such challenge during the process of growth is the Kuznets hypothesis. This work set out to find out whether or not the Kuznets hypothesis hold for SSA countries using autoregressive distributed lag model. The study used a country-by-county regression method on 37 SSA countries. The variables used included - life expectancy, human capital, unemployment, good market, capital market and net bilateral aid. Out of 37 countries used in the study, 24 of these countries supported the Kuznets hypothesis. Real GDP per capita was positive and significant for most countries and few countries have negative coefficient. The result from both countries reveals that the coefficient of human capital was negative even though that of Kenya was not significant. Life expectancy variable was negative and significant for countries that were integrated of order 0 or 1. The coefficient for unemployment was positive for all countries. For some countries, the good market coefficient was negative whiles others were positive. The same could be said for the coefficient of the capital market. Countries with negative capital market coefficient also have negative net bilateral aid coefficient. The short run dynamics also showed that, on average the coefficient of the error correction term for SSA countries was equal to 0.51. This means any deviation from short run income inequality is corrected by 51 percent over each year in long span of time. The study recommends that governments should pay close attention to capital market. Attention should be given to the human capital. Human capital formation through education and skills should be given the necessary consideration.

Keywords: Kuznets Hypothesis, Sub-Sahara Africa, Economic Growth