Impact of public expenditure on income inequality: a comparative evidence from low-and lower-middle-income Sub-Saharan African economies

Among the 17 United Nations Sustainable Development Goals set for achievement by 2030 is the objective of reducing inequality within and among countries. However, six years to the targeted year, widespread income inequality remains a reality and a concern to governments and development partners. This paper investigates the impact of public expenditures in achieving income inequality in low and lower-middle-income economies in the Sub-Saharan African region. To achieve this objective, the study uses annual data on 40 such economies for the period 2000−2022. A range of pre-estimation techniques was utilized in the study, and the Driscoll-Kraay technique was applied to account for the issue of cross-sectional dependence. All six explanatory variables employed in the study, including public expenditure components on health, education, and debt service, are found to have a statistically significant impact on income inequality. However, only public expenditure on education exhibited an income inequality-reduction impact. In contrast to many panel-oriented studies that assume uniform structural characteristics for low-income and lower-middle-income countries within a region, this study explicitly addresses the issue of heterogeneity.