Bridging or Widening the Gap? How Urban Growth and Openness Shape Infrastructure's Impact on Inequality in Sub-Saharan Africa

Abstract

Income inequality remains a persistent socio-economic challenge in Sub-Saharan Africa (SSA), posing a significant threat to inclusive growth and sustainable development. Although infrastructure development is widely promoted as a catalyst for economic progress, its impact on income distribution remains ambiguous and context-dependent. This study investigates both the direct and conditional effects of infrastructure on income inequality in SSA, with particular attention to how urbanization and trade openness may amplify or mitigate these impacts. Using a balanced panel of 44 SSA countries from 2005 to 2023, the analysis employs dynamic panel estimators (System GMM) alongside Method of Moments Quantile Regression (MMQREG) to capture distributional heterogeneity. The findings indicate that, on average, infrastructure expansion tends to widen income inequality; however, this effect is moderated by higher levels of trade openness and urbanization. Specifically, greater trade openness dampens the inequality-increasing effect of infrastructure and can occasionally reverse it, resulting in a slight reduction in inequality at higher openness levels. Likewise, accelerated urban population growth offsets the adverse distributional impact, with results indicating that an urban growth rate exceeding 6.5% neutralizes the inequality effect. The quantile regression results further confirm that the relationship between infrastructure and inequality is more pronounced at lower and median quantiles. These insights underscore the importance of integrated infrastructure planning, supportive trade policies, and inclusive urban governance to leverage infrastructure for more equitable development in SSA.