Global value chains participation and income inequality in Africa

Abstract

Purpose The welfare effects of Global Value Chains (GVC) participation remain highly under-researched, particularly in Africa. Hence, this study aims to empirically estimate the effect of GVC participation on income inequality in Africa and identify the channel(s) of effect. To achieve this broad objective, two specific objectives were set out: to estimate the effect of GVC participation on income inequality in Africa and to determine the channel(s) through which GVC participation affects income inequality in Africa. Design/methodology/approach The study used the dynamic system generalised method of moment estimation technique. Findings The findings of this study show that GVC has a significant positive impact on income inequality in Africa. In determining the channel(s) of effect, the results show that backward participation captured by the Foreign Value Added has a significant negative impact on income inequality in Africa. Originality/value To the best of the authors’ knowledge, this is the first study to examine the effects of GVC participation on income equality in Africa. This study, therefore, opens a new frontier of knowledge in international business in Africa.