Ethnic Inequality in Sub-Saharan Africa and International Trade

Maxim Ananyev, University of California, Los Angeles
Mikhail Poyker, University of California, Los Angeles

This paper investigates the determinants of income inequality between different ethnic groups in Sub-Saharan Africa. We make two contributions: first, we offer a Bayesian latent variable approach of estimating income inequality from survey data where the direct data on personal incomes are either lacking or unreliable. Secondly, we demonstrate statistically, that countries that export more manufacturing goods and natural resources have larger disparities in incomes between ethnic groups, but not no systematic differences in incomes within ethnic groups. In an attempt to investigate the mechanism of this statistical association, we use enterprise survey data to test if exporting firms face fewer regulatory restrictions (both formal and informal) and preferential tax treatment. Our study offers new evidence on the effect of international trade on income inequality in developing world.