Urbanization and poverty in Sub-Saharan Africa: evidence from dynamic panel data analysis of selected urbanizing countries

Figures & data

Table 1. Summary statistics of key variables

Variable	Obs	Mean	Std. Dev.	Min	Max
Poverty Headcount ratio	203	0.54	0.21	0.03	0.95
Poverty Gap	203	0.24	0.14	0.01	0.65
Urbanization level	203	0.34	0.17	0.05	0.89
Urbanization rate	203	0.02	0.01	0.0003	0.12
GDP per-capita	203	2,601.99	2,968.68	437.46	6,249.55
GDP growth per-capita	203	0.01	0.04	−0.14	0.13
Gini Index	203	0.45	0.08	0.29	0.66
Gini Index growth	174	−0.01	0.11	−0.50	0.30

Figure 1. Analytical framework of the study.

Table 2. Alternative estimates for the lagged dependent variable ($\alpha )$ of Equation (2)(2) ${\mathrm{p}}_{\mathrm{i}\mathrm{t}}=\mathrm{a}+\alpha {\mathrm{p}}_{\mathrm{i},\mathrm{t}-1}\hspace{0.17em}+\hspace{0.17em}{\beta }_1{\mathrm{u}}_{\mathrm{i}\mathrm{t}}+{\beta }_2{{\mathrm{u}}_{\mathrm{i}\mathrm{t}}}^2+\gamma {\mathrm{k}}_{\mathrm{i}\mathrm{t}}+\mathrm{\Omega }{\mathrm{r}}_{\mathrm{i}\mathrm{t}}+{\xi }_{\mathrm{i}\mathrm{t}}$(2)

	Urbanization level and poverty		Urbanization rate and poverty
	Equation (2(2) ${\mathrm{p}}_{\mathrm{i}\mathrm{t}}=\mathrm{a}+\alpha {\mathrm{p}}_{\mathrm{i},\mathrm{t}-1}\hspace{0.17em}+\hspace{0.17em}{\beta }_1{\mathrm{u}}_{\mathrm{i}\mathrm{t}}+{\beta }_2{{\mathrm{u}}_{\mathrm{i}\mathrm{t}}}^2+\gamma {\mathrm{k}}_{\mathrm{i}\mathrm{t}}+\mathrm{\Omega }{\mathrm{r}}_{\mathrm{i}\mathrm{t}}+{\xi }_{\mathrm{i}\mathrm{t}}$(2) )		Equation (2)
Estimation	(2a)	(2b)	(2c)	(2d)
Dependent Variable	ln(Poverty Headcount)	ln(Poverty Gap)	ln(Poverty Headcount)	ln(Poverty Gap)
OLS	0.750(0.000)	0.763(0.000)	0.746(0.000)	0.702(0.000)
FE (within)	0.620(0.000)	0.572(0.000)	0.628(0.000)	0.471(0.000)
DIFF-GMM1	0.343(0.000)	0.240(0.000)	0.350(0.000)	0.141(0.017)
Bond (2002) Suggestion	SYS-GMM	SYS-GMM	SYS-GMM	SYS-GMM

Table 3. Correlation matrix of key variables

Variables	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
(1) Poverty Headcount ratio	1.000
(2) Poverty Gap	0.936***	1.000
(3) Urbanization rate	0.137*	0.084	1.000
(4) Urbanization level	−0.543***	−0.431***	−0.377***	1.000
(5) GDP per-capita growth	−0.133*	−0.173**	0.075	−0.110	1.000
(6) Gini index growth	0.088	0.123	0.220***	−0.030	−0.082	1.000
(7) GDP per-capita	−0.603***	−0.495***	−0.146**	0.730***	−0.026	0.031	1.000
(8) Gini index	0.024	0.182***	−0.037	0.148**	−0.024	0.319***	0.307***	1.000

Note: */** /*** indicate statistically significant levels at, respectively, 10%/5%/1%.

Figure 2. Scatterplot of the relationship between urbanization level and the poverty headcount: 1985–2019.

Figure 3. Scatterplot of the relationship between urbanization level and the poverty gap: 1985–2019.

Table 4. Regression results for urbanization and poverty headcount ratio

Estimation	Urbanization Rate and Poverty Headcount ratio		Urbanization level and poverty headcount ratio
Dependent Variable: ln(Poverty Headcount)	Two-step SYS-GMM (1)	Two-step SYS-GMM (2)	Two-step SYS-GMM (1)	Two-step SYS-GMM (2)
Lagged [ln(Poverty Headcount)]	0.49(0.65)***	0.97(0.25)***	0.64(0.12)***	1.74(0.92)*
ln(Urbanization rate)	−0.04(0.02)**	−0.07(0.03)***
ln(Urbanization level)			−0.22(0.08)***	−0.60(0.27)**
ln(per-capita GDP growth)	−0.42(0.29)		−0.33(0.39)
Squared (per capita GDP growth)	−7.00(3.46)*	−13.79(7.56)*	−11.52(5.00)**	−31.55(16.15)*
ln(Inequality growth)	0.52(0.11)***	1.02(0.27)***	0.27(0.17)
Squared (Inequality growth)	0.2(0.31)		−0.98(0.33)***	−2.69(1.26)**
ln(Initial Inequality)	0.16(0.09)*	0.32(0.16)**	−0.01(0.11)
ln(Initial per-capita GDP)	−0.12(0.04)***	−0.23(0.07)***	−0.08(0.05)
Initial Urbanization level	−0.11(0.04)**	−0.22(0.08)***
Urbanization level*Inequality Level	1.04(0.44)**	2.04(0.88)**	1.53(0.66)**	4.2(1.91)**
Urbanization level*per-capita GDP	−0.0001(0.00002)***	−0.0002(0.00003)***	−0.0001(0.00002)***	−0.0002(0.0001)***
Time effects	−0.07(0.01)***	−0.13(0.02)***	−0.04(0.02)**	−0.11(0.04)***
Constant	0.55(0.31)*		0.11(39)
Countries	29		29
T	7		7
Observations	174		145
No. of Instruments	27		23
F-test	359.13 (0.00)		210.10 (0.00)
AR(1)	−2.12 (0.34)		−1.86 (0.06)
AR(2)	−0.91 (0.36)		−0.41 (0.68)
Sargan	21.07 (0.10)		14.53 (0.21)
Hansen	14.25 (0.43)		11.10 (0.44)
Difference in Hansen Test
(a) Instruments for levels
H excluding group	10.08 (0.44)		7.54 (0.48)
Dif(null H = exogenous)	4.17 (0.38)		3.56 (0.31)
(b) Instumental variables
H excluding group	1.51 (0.82)		0.47 (0.79)
Dif(null H = exogenous)	12.74 (0.24)		10.64 (0.30)

Notes: */** /*** indicate significance levels at, respectively, 10%/5%/1%. The standard errors for the estimated parameters are in parenthesis. For the F, AR(1), AR(2), Sargan, Hansen and Difference in Hansen tests, the p-values are in parenthesis. The panel data cover the period from 1985–2019 and the variables are calculated over 5-year intervals. Also, (1) = short-run estimates; (2) = long-run estimates.

Table 5. Regression results for urbanization and poverty gap

Estimation	Urbanization Rate and Poverty Gap		Urbanization Level and Poverty Gap
Dependent Variable: ln(Poverty Gap)	Two-step SYS-GMM (1)	Two-step SYS-GMM (2)	Two-step SYS-GMM (1)	Two-step SYS-GMM (2)
Lagged [ln(Poverty Gap)]	0.44(0.11)***	0.80(0.34)**	0.52(0.07)***	1.09(0.29)***
ln(Urbanization rate)	-0.05(0.03)**	-0.09(0.04)**
ln(Urbanization level)			-0.32(0.10)***	-0.68(0.18)***
ln(per-capita GDP growth)	-1.48(0.44)***	-2.67(0.81)***	-1.13(0.33)***	-2.36(0.74)***
Squared (per capita GDP growth)	-13.53(3.42)***	-24.36(8.55)***	-10.20(3.33)***	-21.29(7.28)***
ln(Inequality growth)	1.18(0.16)***	2.12(0.55)***	0.57(0.21)**	1.20(0.52)**
Squared (Inequality growth)	0.90(0.43)**	1.62(0.60)***	0.15(0.43)
Initial Inequality	0.17(0.18)		0.06(0.10)
Initial per-capita GDP	-0.17(0.07)**	-0.30(0.11)***	-0.20(0.04)***	-0.41(0.05)***
ln(Initial Urbanization level)	-0.29(0.10)***	-0.52(0.13)***
Urbanization level*Inequality Level	3.42(0.93)***	6.15(1.20)***	3.21(0.73)***	6.69(0.96)***
Urbanization level*per-capita GDP	-0.0002(0.00003)***	-0.0003(0.00004)***	-0.0001(0.00002)***	-0.0003(0.00002)***
Time effects	-0.12(0.01)***	-0.21(0.04)***	-0.08(0.02)***	-0.16(0.03)***
Constant	0.03(0.49)		0.33(0.16)*
Countries	29		29
T	6		6
Observations	174		174
No. of Instruments	29		29
F-test	807.38 (0.00)		774.45 (0.00)
AR(1)	-2.3 (0.02)		-2.38 (0.02)
AR(2)	-1.21 (0.23)		-1.37 (0.17)
Sargan	13.86 (0.61)		16.82 (0.45)
Hansen	21.01 (0.18)		21.49 (0.21)
Difference in Hansen Test
(a) Instruments for levels
H excluding group	15.73 (0.20)		13.92 (0.38)
Dif(null H=exogenous)	5.28 (0.26)		7.57 (0.11)
(b) Instumental variables
H excluding group	8.82 (0.18)		12.29 (0.14)
Dif(null H=exogenous)	12.20 (0.27)		9.20 (0.42)

Notes: */** /*** indicate significance levels at, respectively, 10%/5%/1%. The standard errors for the estimated parameters are in parenthesis. For the F, AR(1), AR(2), Sargan, Hansen and Difference in Hansen tests, the p-values are in parenthesis. The panel data cover the period from 1985–2019 and the variables are calculated over 5-year intervals. Also, (1) = short-run estimates; (2) = long-run estimates.

Table 6. Comparing the growth rates and levels of urbanization elasticities of poverty

	Growth rates of Urbanization and Poverty Indices			Levels of Urbanization and Poverty Indices
Estimated Equation	2	2		2	2
Table No.	Table 4	Table 5		Table 4	Table 5
Dependent Variable	ln(Poverty Headcount)	ln(Poverty Gap)	Dominant effect	ln(Poverty Headcount)	ln(Poverty Gap)	Dominant effect
Main Explanatory Variable	Lagged [ln(Urbanization rate)]	Lagged [ln(Urbanization rate)]		Lagged [ln(Urbanization level)]	Lagged [ln(Urbanization level)]
Short-run elasticity	-0.04	-0.05	Poverty Gap	-0.22	-0.32	Poverty Gap
	(0.02)**	(0.03)**		(0.08)***	(0.10)***
Long-run elasticity	-0.07	-0.09	Poverty Gap	-0.60	-0.68	Poverty Gap
	(0.03)***	(0.04)**		(0.27)**	(0.18)***

Notes: * / ** /*** indicate significance levels at respectively 10% / 5% / 1%. The standard errors for the estimated parameters are in parenthesis. The panel data cover the period from 1985-2019 and the variables are calculated over 5-year intervals.

Table

Variables	Definitions/Measurements	Expected sign	Sources
Dependent Variables
Poverty Headcount (P0)	Percentage of population with income/consumption below the poverty line of $1.90 a day (2011 PPPs)		WDI
Poverty Gap (P1)	Mean shortfall in income/consumption from the poverty line $1.90 a day (2011 PPPs)		WDI
Urbanization variables
Urbanization rate	Average annual growth rate of urban population	Negative	WUP
Urbanization level	Percentage of total population living in areas described as cities by national statistics	Negative	WUP
Control variables
GDP per-capita	expenditure-side real GDP per-capita at chained PPPs (in million 2011 USD)	Negative	PWT
GDP growth rate	Annual percentage growth of real GDP per-capita (constant 2011 national prices)	Negative	Calculated from PWT data
Gini index	A measure of income distribution among individuals or households within an economy	Positive	WDI
Gini index growth	Changes in the measure of income distribution among individuals or households within an economy	Positive	Calculated from WDI data

PWT, Penn World Tables; WDI, World Development Indicators; WUP, World Urbanization Prospects

Bond, S. (2002). Dynamic panel data models: A guide to micro data methods and practice. Centre for Microdata Methods and Practice Working Paper, No. CWP09/02, London. https://doi.org/10.1920/wp.cem.2002.0902

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