Full length articleCapital flows and the distribution of income in sub-Saharan Africa

In this study, we examine the differential effects of capital flows on the distribution of income in 21 sub-Saharan African (SSA) countries over the period 1984-2013. The empirical results show that FDI has a moderate positive effect on income inequality, which suggests that FDI increases income inequality in both the short and the long-run. Remittances, external debt and aid flows, however, do not have robust impact on income inequality. Further, our findings indicate unidirectional causality from FDI to income inequality in the short-run when we account for heterogeneity. Finally, our country-specific estimates indicate that capital flows have mixed effect on inequality in SSA.