Financial Development and Income Inequalities in Sub-Saharan Africa : The Role of Institutional Quality
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Date
2026
Authors
Soumtang Bimé Valentine
Pierre Christian Tsopmo
Journal Title
Journal ISSN
Volume Title
Publisher
AERC
Abstract
The objective of this paper is to evaluate the effect of institutional quality on the financial development- income inequality nexus in sub-Saharan Africa (SSA). To this end, we estimate a dynamic panel model using data from thirty-three (33) SSA countries between 1990 and 2019 employing the generalized method of moments in system. To capture financial development, we use its fourth dimensions namely depth, efficiency, access and stability, and we construct a composite index using principal component analysis. We also use institutional quality indicators. The results show that the poor quality of institutions in SSA countries reduce the effectiveness of financial development in terms of income inequality overall. However, this effect is mitigated by financial efficiency. These results are consistent with the robustness tests. These results call for the implementation of programs to strengthen institutional quality in SSA countries.