Abstract
This study examined the effects of global commodity prices on income inequality in the Southern African Development Community (SADC) for the time period from 1990 to 2019. Previous literature focused on the resource curse theory, however, only a few studies have focused on its distributional consequences. This study contributes to the scarce literature by explaining how the resource curse paradox affects income In so doing, the study analysed the effects of global commodity prices and how they affect income inequality using the PMG estimator. The technique is consistent given that the panel is co-integrated, heterogenous, and non-stationary. The empirical findings show that in the short-run, only gold prices, from the metals class, has an effect on income inequality. In the long-run, brent crude oil price (energy class), gold price growth rate and brent crude oil price growth rate have a reducing effect on income inequality whilst growth rate in soybeans prices (agricultural class) have an increasing effect on income inequality. Furthermore, the findings showed that agriculture and metal classes affect income inequality more. The results from this study have substantial policy ramifications. The study suggests that countries in the SADC region focus on improving institutional quality, education and skills so as to attract investments and increase wages in the tradeable sector.
Keywords: Income inequality, global commodity prices, global commodity price growth rate and resource curse