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Sustainable Growth: Growth by Poverty Alleviation or Poverty Creation – The Case of Sub-Saharan Africa

Sustainable Growth: Growth by Poverty Alleviation or Poverty Creation – The Case of Sub-Saharan Africa

Adem Gök (Kırklareli University, Turkey)
Copyright: © 2022 |Pages: 12
DOI: 10.4018/978-1-6684-4322-4.ch017
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Abstract

The authors analyzed 30 countries in Sub-Saharan Africa over the period of 1996-2015 to investigate whether economic growth is sustainable, whether decreasing income inequality sustains growth, and whether economic growth alleviates or creates poverty due to decreasing or increasing income inequality, respectively. They found that growth in Sub-Saharan Africa is self-reinforcing in the sense that past levels of GDP per capita positively affect current levels of GDP per capita due to the strategic complementarity. Decrease in income inequality leads to growth due to increased consumption, higher investment in education, lower corruption, higher political stability, and more equal redistribution policies. Economic growth does not bring down income inequality in order to maximize social welfare. The authors conclude that growth is not sustainable in Sub-Saharan Africa since it only meets two of the three criteria.
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Background

The literature has heavily concentrated on the one-way effect of income inequality on economic growth. Although there are studies investigating the effect of economic growth on poverty or income inequality, there is no study investigating the role of economic growth on poverty or income inequality in the broader sense for Sub Saharan Africa.

Kuznets (1955) established a systematic association between income inequality and economic growth. He argued that income inequality increases in the early stages of development, where the society shifts from rural structure to industrial structure, and it decreases when the society shits from industrial structure to modern structure, which penetrates the entire socio-economic texture of the society. An inverted U-shaped relationship between per capita income and income inequality, which is known as Kuznets Curve.

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