The Consumption, Income, and Wealth of the Poorest: An Empirical Analysis of Economic Inequality in Rural and Urban Sub-Saharan Africa for Macroeconomists

• Authors: Leandro De Magalhães and Raül Santaeulàlia-Llopis
• Journal of Development Economics, November 2018

We provide new empirical insights on the joint distribution of consumption, income, and wealth using cross-sectional and panel household-survey data from three of the poorest countries in the world—Malawi, Tanzania, and Uganda—all located in Sub-Saharan Africa (SSA). Our main contribution is to establish the co-existence of two phenomena in SSA: (i) a low transmission from income inequality to wealth inequality (i.e., low accumulation); and (ii) a low transmission from income inequality to consumption inequality (i.e., high consumption insurance). The variation between rural and urban areas in SSA—and between SSA and the United States of America—reveals a negative relationship, and potentially, a trade-off between accumulation and consumption insurance.