Human capital and income inequality in Africa: robust governance synergies and thresholds

Abstract

It has been widely documented that good governance reduces income inequality when it creates a conducive environment for quality human capital development. This study investigates the unconditional effects of human capital on income inequality and explores whether institutional quality mechanisms for corruption control and government effectiveness moderate the relationship. Results from the instrumental variable generalised method of moments estimator and data for an unbalanced panel data of 36 African over the period 2010-2020, shows that human capital increases income inequality. However, robust evidence from the interactive analysis reveals that corruption control and government effectiveness mitigate the income inequality-enhancing effect of human capital. This study underscores the need to improve structures and system government effectiveness and corruption control for human capital development to equalise income in Africa.

Keywords

• Africa
• corruption
• good governance
• human capital
• income inequality
• Development Policy