Microeconomic Determinants Of Income Inequality In Ghana
Date
2022-07
Authors
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Publisher
University Of Ghana
Abstract
The subject of inequality is relevant in economic discussions, considering its impact on development and growth. According to the Ghana Living Standard Survey (GLSS), Ghana's inequality measured by the Gini Coefficient grew from 0.42 in 2012/2013 to 0.45 in 2016/17. This increase in inequality could threaten national growth and poverty reduction initiatives, undermine social stability, and exacerbate political discontent within the nation. Hence, to curtail such events, it is prudent to understand the factors influencing inequality in Ghana. In line with that, this study aimed at investigating the microeconomic drivers of inequality in Ghana.
Using data from the sixth and seventh rounds of the GLSS, this study employed the Recentered Influence Function (RIF) model to investigate the factors affecting Ghana's Gini Coefficient. In addition, the study used the RIF -Oaxaca Blinder decomposition technique to determine the impact of household characteristics on inequality over time. The study found that for both rounds of the GLSS, household heads located in the Western, Volta, Brong Ahafo, Central and Upper East regions caused a decline in inequality compared to household heads in the capital region, Greater Accra. Also, a household head with secondary or primary levels of education resulted in a decrease in inequality relative to a household head with no education. In addition, household heads who receive remittances contributed to a reduction in inequality compared to their counterparts who do not receive remittances.
The study recommends that tackling the causes of inequality can be achieved through socioeconomic empowerment efforts such as educational policy initiatives. Thus, pursuing educational policies focused on improving the accessibility and quality of education will have a favourable effect on reducing inequality. Furthermore, a framework for accelerating regional development in Ghana should be created to promote growth. Localized growth initiatives should be developed and implemented by MMDAs (Metropolitan, Municipal and District Assemblies). These initiatives would engender growth within the various regions in Ghana and contribute to reducing inequality. Finally, the government should create an enabling environment for robust transfer systems that would facilitate the smooth transfer of remittances.
Description
MPhil. Economics
Keywords
Ghana, Income, Inequality, Microeconomic