A dynamic linkage between economic complexity, institutional quality, and income inequality in Africa

Purpose — This study examines the role of institutional quality in the relationship between economic complexity and income inequality in 34 African countries from 2005 to 2023. Methods — To achieve its objectives, the study employs the Driscoll–Kraay standard errors, Fully Modified OLS (FMOLS), Method of Moments Quantile Regression (MMQR), and the Dumitrescu–Hurlin Granger non-causality (DHGC) test.Findings — The first three methods reveal that economic complexity reduces income inequality, while weak institutions amplify it. The interaction results show that institutional inefficiencies weaken complexity's inclusiveness. The DHGC result implies a two-way relationship between economic complexity and income inequality. Implications — The research suggests that strong institutions are crucial for boosting Africa's productivity and reducing income disparities.Originality — This study contributes to the literature by exploring the long-term relationship among economic complexity, institutional quality, and income inequality in Africa.