Does the Economic Growth in the Developing Countries Always Contribute to Growing Inequalities? Cluster Analysis of the sub-Saharan Countries

Abstract

The article pertains to the topic of the relation between the income inequalities and the economic growth in sub-Saharan Africa. According to the Kuznets's hypothesis, sub-Saharan countries, most of them being on the low stage of development, should be characterized by positive impact of growth on the income inequalities. However, data suggest that various development patterns exist in this region. The aim of the paper is to identify groups of sub-Saharan countries where the relation between growth and inequalities is similar. The analysis was based on data concerning the economic growth, Gini coefficient and the share of income held by the richest and poorest 10% of the population in 38 sub-Saharan countries. Due to the availability of the data, the analyzed time period differs for different countries, with 1985 being the oldest data point used, and 2013 the newest. The cluster analysis was conducted using the Ward algorithm and the singlelinkage algorithm. The correlation analysis showed no significant relation between economic growth and income inequalities in analyzed countries. The cluster analysis results show that there is a considerable variety in growthinequality relationship in sub-Saharan Africa. Angola, with a high average economic growth, had managed to significantly reduce income inequalities, while many other countries saw an inequality increase with only slightly lower growth. There is also no link between clusters' composition and the resources abundance in analyzed countries.