ANALYSIS OF THE EFFECT OF HUMAN DEVELOPMENT ON INCOME INEQUALITY IN WEST AFRICAN COUNTRIES: FRESH EVIDENCE FROM NOVEL CS-ARDL MODEL

Abstract

Extreme income inequality is the defining challenge of this time. The gap between the 
rich and poor is at highest level, in fact not only in developing economies, as is the case 
of West Africa, but also in developed economies despite their high technological 
advancement. This study examines the effect of human development on income inequality 
in 16 West African countries over the period of 1990 - 2022, using the novel CS-ARDL 
model. The tests for slope heterogeneity and cross-sectional dependence indicate that the 
slopes of the regression coefficients are not homogeneous across the countries and there 
is strong cross-sectional dependency among the counties. Findings suggest that 
educational attainment and a decent standard of living significantly reduce income 
inequality in both the short-run and long-run. Conversely, life expectancy and government 
expenditure exacerbate income inequality. In addition, the human development is found to 
promote income distribution. Bidirectional causality is found between human development, 
educational attainment, life expectancy, decent standard of living, and income inequality. 
The study concludes that human development reduces income inequality and recommends 
policymakers focus on improving access to quality education, healthcare, and skills 
development, especially for marginalized populations. Efforts in these areas can positively 
impact both human development and income distribution.