Income inequality, financial flows and political institution: sub-Saharan African financial network

Using firm-level loan contracts, we generate aggregate measures of financial connections and examine how these indices relate to income inequality in sub-Saharan African (SSA) countries. The results reveal that more connectedness is not beneficial for these economies as shown by the degree and the e...

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Bibliographic Details
Published in:Empirical economics 2020-06, Vol.58 (6), p.2635-2665
Main Authors: Inekwe, John Nkwoma, Jin, Yi, Valenzuela, Maria Rebecca
Format: Article
Language:English
Subjects:
Connectedness
Econometrics
Economic models
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Finance
Income inequality
Insurance
Management
Political risk
Statistics for Business
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Summary:Using firm-level loan contracts, we generate aggregate measures of financial connections and examine how these indices relate to income inequality in sub-Saharan African (SSA) countries. The results reveal that more connectedness is not beneficial for these economies as shown by the degree and the eigenvector indices. Betweenness centrality worsens income inequality such that the act of intermediation in the provision of financing remains detrimental to net and market income inequalities. Independent access to funding has no significant effect on income inequality. While accounting for the influence of political instability, the results reveal that financial connectedness is beneficial in reducing income inequality.
ISSN:0377-7332
1435-8921
DOI:10.1007/s00181-019-01634-3