Export diversification and income inequality in Central Africa: An analysis of the employment channel

Abstract

This paper analyses the effect of export diversification on income inequality in Central Africa through the employment channel. The sample consists of 9 countries over the period 2000–2019. A quadratic regression is applied to a panel data model using the random effect and the two stages least squares methods. The results show that export diversification increases income inequality in Central Africa. However, this effect is non-linear with the form of an inverted U. Increasing the number of wage workers reduces the marginal effect of export diversification on income inequality while increasing the number of unpaid workers increases this effect. Moreover, diversification is less likely to reduce income inequality when it increases male employment than when it increases female employment. The effect of diversification on income inequality remains non-linear in an inverted U-shape for CEMAC countries’ members (CEMAC: Economic and Monetary Community of Central African States) and oil-producing countries, while it is non-linear in a U-shape for non-CEMAC countries and non-oil-producing countries. We recommend that Central African countries promote the diversification of exports while encouraging new productive activities to generate more paid jobs and to favor female employment.