Corruption-inequality relationship in Sub-Saharan Africa

Abstract

This paper investigates the effect of corruption on income inequality in Sub-Saharan Africa (SSA) over the period 1996–2022. Applying a threshold model approach notably the Panel Smooth Transition Regression (PSTR), two major results emerge from this analysis. First, the results reveal a U-shaped relationship between corruption and income inequality, with a different inflection point depending on the type of corruption. Second, we obtained strong evidence that corruption significantly increases income inequality in Sub-Saharan Africa only if the level of corruption is above a certain threshold, otherwise the effect of corruption is not detrimental. Furthermore, the results indicate that judicial corruption has the most detrimental effect on income inequality, followed by executive and legislative corruption. The paper suggests that public authorities promote transparency and good governance. Also, allocating resources to improving the education and healthcare systems will also help reduce inequalities.