A Bi-Regional Analysis of the Effect of Urbanisation on Income Inequality in Asia & Sub-Saharan Africa Using Panel Estimations and Dynamic Panel Generalized Method of Moments Techniques, 1990-2020

This paper aimed to ascertain if there is a statistically significant difference in linearity or directional effect of urbanisation on income inequality in Asia and Sub-Saharan Africa. To explore the research question it uses panel estimations to introduce into the literature a bi-regional analysis of the relationship between urbanisation and income inequality over the period 1990-2020. This was conducted using panel estimations and dynamic panel Generalized Method of Moments techniques. The findings show that Asia and Sub-Saharan Africa differ in terms of the directional effect of urbanisation on income inequality, as well as linearity of the relationship. First estimates for Asia indicate a statistically significant inverse-U shaped relationship between urbanisation and income inequality, with an implied turning point at 23% urbanisation. Whereas estimates for Sub-Saharan Africa indicate a statistically significant negative linear relationship between urbanisation and income inequality, with a larger statistically significant negative linear effect in the long run. Future urbanisation in both regions should reduce income inequality on aggregate, ceteris paribus, as 46/48 Asia nations have passed the implied turning point as of 2020.<p>This paper aimed to ascertain if there is a statistically significant difference in linearity or directional effect of urbanisation on income inequality in Asia and Sub-Saharan Africa. To explore the research question it uses panel estimations to introduce into the literature a bi-regional analysis of the relationship between urbanisation and income inequality over the period 1990-2020. This was conducted using panel estimations and dynamic panel Generalized Method of Moments techniques. The findings show that Asia and Sub-Saharan Africa differ in terms of the directional effect of urbanisation on income inequality, as well as linearity of the relationship. First estimates for Asia indicate a statistically significant inverse-U shaped relationship between urbanisation and income inequality, with an implied turning point at 23% urbanisation. Whereas estimates for Sub-Saharan Africa indicate a statistically significant negative linear relationship between urbanisation and income inequality, with a larger statistically significant negative linear effect in the long run. Future urbanisation in both regions should reduce income inequality on aggregate, ceteris paribus, as 46/48 Asia nations have passed the implied turning point as of 2020.</p>