Working Paper 246 - Why is inequality high in Africa?

This paper computes asset-based inequality for 44 African countries in multiple waves using over a million household histories to study inequality between and within countries. It decomposed within country inequality into components deemed to represent opportunities and those attributed to individual efforts such as education. The between country inequality is negatively correlated with the proportion of households that completed tertiary education. Countries with high remittance flows also have lower inequality. Finally, assets or goods market distortions played an important role in driving inequality in Africa. Our results suggest that close to 40% of asset inequality within countries are due to inequality of opportunities with significant differences across countries. This component of inequality has been declining over time however. Political governance and ethnic fractionalization explained 25% of inequality in opportunities while level of development is uncorrelated with it. In addition, inequality of opportunity is strongly correlated with child and maternal mortality and other measures of disease burden.