Investment, Employment, and Trade as Drivers of Income‐Based Inclusive Growth in Sub‐Saharan Africa

Abstract

ABSTRACT This study investigates the drivers of income‐based inclusive economic growth in 14 Sub‐Saharan African countries from 2000 to 2023, focusing on investment, employment, trade openness, population growth, inflation, and foreign direct investment. Using panel econometric techniques, including the pooled mean group estimator, its nonlinear autoregressive distributed lag extension, and the dynamic common correlated effects estimator, the analysis captures long‐ and short‐run dynamics, as well as asymmetric and interaction effects. The findings indicate that foreign direct investment is positively associated with per capita income growth, with its growth‐enhancing effect strengthened in more open economies. Population growth constrains long‐run per capita income growth, while domestic investment exhibits uneven effects, highlighting the importance of capital allocation efficiency. Short‐run dynamics suggest that reductions in unemployment and targeted capital inflows support short‐term economic performance. Overall, the results provide evidence for policy interventions that can support income growth and employment creation, thereby contributing to the income‐related dimension of Sustainable Development Goal 8 in the region.