Dynamic effects of fiscal consolidations on income inequality in Sub-Saharan African countries

ABSTRACT

This study explores the short-to-medium-term effects of fiscal consolidation on income inequality in 40 Sub-Saharan African countries from 1990 to 2021 by applying the quantile local projection method at the median. The study finds that periods of fiscal consolidation reduce inequality in the short run, with spending-driven consolidation having a positive effect on income parity, while tax-driven consolidations have an insignificant impact. The study concludes that the distributional effects of fiscal consolidation in SSA countries are “progressive,” implying that well-designed and targeted fiscal measures contribute to more equitable income distribution.

KEYWORDS:

• CAPB-to-GDP ratio
• income inequality
• quantile local projection method
• quantile impulse response functions
• Sub-Saharan African countries

JEL CLASSIFICATION:

• D31
• D63
• E62
• H30

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Gabriel Temesgen Woldu

Gabriel Temesgen Woldu is a research fellow at the Institute of Economics and Economic Development, Department of Theoretical Economics, University of Szeged, Hungary. His expertise includes macroeconomics, fiscal policy, climate change, and economic policy analysis.

Yibrah Hagos Gebresilassie

Yibrah Hagos Gebresilassie is an associate professor in economics at the Department of Economics, Aksum University, Ethiopia. He obtained his Ph.D. in Economics from the University of KwaZulu Natal (UKZN) in March 2019, in South Africa. He taught Economics courses both for undergraduate and postgraduate students. He is a founder and editor-in-chief of the Axumite Journal of Business and Development and an active editorial advisory board member of The Journal of Social Economics Research.

Hafte Gebreselassie Gebrihet

Hafte Gebreselassie Gebrihet is a Doctor of Public and development management specializing in the political economy of land reform. He is currently a Postdoctoral Research Fellow at the Nelson Mandela School of Public Governance at the University of Cape Town (UCT). He has over 12 years of research, community service, and teaching experience in Ethiopia and South Africa. Hafte has published several academic articles in high-quality peer-reviewed journals and presented papers at national and international conferences. He has worked with several national and international public, private, and civil society associations. Hafte is a member of the South African Association of Public Administration and Management and the Ethiopian Economic Association.

Samaneh Raiss Shaghaghi

Samaneh Raiss Shaghaghi is a distinguished researcher and PhD candidate in Economics at the University of Szeged, Hungary. Her research interests are public economics, economic policy and governance.