The Consumption, Income, and Wealth of the Poorest: An Empirical Analysis of Economic Inequality in Rural and Urban Sub-Saharan Africa for Macroeconomists

Abstract

We provide new empirical insights on the joint distribution of consumption, income, and wealth using cross-sectional and panel data from three of the poorest countries in the world—Malawi, Tanzania, and Uganda—all located in Sub-Saharan Africa (SSA). While income inequality in SSA is similar to that of the United States, consumption and wealth inequality are substantially lower in SSA. This gives rise to our two main findings for SSA: (i) a low transmission from income inequality to wealth inequality related to a low ability to accumulate wealth; and (ii) a low transmission from income inequality to consumption inequality related to a high ability to insure consumption. These results suggest a trade-off between accumulation and consumption insurance for SSA. Our results are more salient in the rural areas than in the urban areas of SSA.