The Effect of Human Capital on Income Inequality: Evidence from Selected Sub-Saharan Countries

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Addis Ababa University


The study explores the impact of human capital on income inequality in 24 selected Sub-Saharan African countries during the period from 2010 to 2020. The study used Gini coefficient as a measure of income inequality. To conduct the econometric data analysis, a two-step System Generalized Method of Moments (GMM) was employed. Other explanatory variables, including Domestic Credit to the Private Sector, GDP per capita, Inflation, and Population Growth, were controlled for in the analysis. The results obtained from the two-step system GMM indicate that human capital has a significant positive effect on income inequality. This implies that as human capital improves within a society, income inequality worsens. The positive relationship between the Gini coefficient and human capital can be attributed to the highly unequal distribution of access to and quality of education in Sub-Saharan Africa. Another variable found to have a significant effect is inflation. The findings demonstrate that inflation significantly and negatively impacts income inequality in Sub-Saharan Africa. Overall, this study provides valuable insights into the relationship between human capital, inflation, and income inequality in Sub-Saharan Africa, shedding light on the factors that contribute to income disparities within the region



Human capital, Sub Saharan Africa, Income Inequlity