Effect of household consumption volatility on income inequality in developing countries: a quantile regression approach

---

Résumé

Purpose – This study assesses how household consumption volatility affects income inequality using panel data
from 94 developing countries (1990–2022). The analysis also explores regional differences.
Design/methodology/approach – Quantile instrumental variables regression measures the link between
household consumption volatility and income inequality. This method effectively handles asymmetric
distributions and extreme values, key for evaluating uneven effects across income groups. Buffer-stock saving
rates help analyze shock absorption, increasing policy relevance. The sample encompasses 94 developing
countries (1990–2022), with a particular emphasis on Sub-Saharan Africa.
Findings – The results clearly indicate that household consumption volatility leads to increased income
inequality in developing countries. This effect is most pronounced in countries that initially have lower levels of
inequality, as shown by significant effects at the SIVQR 0.1 and SIVQR 0.25 quantiles. In the case of sub-
Saharan Africa, the positive and statistically significant relationship between consumption volatility and income
inequality is particularly notable. However, in other developing regions, this relationship is not statistically
significant, highlighting important regional differences in how volatility impacts inequality.
Originality/value – This research provides evidence on the relationship between household consumption
volatility and income inequality in developing countries, with a focus on sub-Saharan Africa. The results suggest
that enhancing macroeconomic stability may help mitigate inequality, particularly in contexts where volatility
has a more pronounced impact.

Mots-clés

Income inequality, Consumption volatility, Developing countries, Sub-Saharan Africa