Working Paper

Capital Flight from Africa and Development Inequality: Domestic and Global Dimensions

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Over the past decades African economies have exhibited two stunning paradoxes: growth acceleration coexisting with stubbornly high poverty rates; increasing capital flight along with widening development financing gaps. There has been no attempt to link the two in the literature.

This paper attempts to fill the gap; it suggests that the implications of capital flight for the inequality-growth-poverty nexus may be the key. Specifically, the paper proposes to shift attention to conceptual and empirical analysis of the implications of capital flight for inequality along income lines and inequality in development both within African countries and between Africa and advanced economies. The evidence presented in the paper indicates that Africa may be more unequal along human development dimensions than along income, and points to the possibility that capital flight may be one of the factors behind the observed limited poverty reduction gains from growth and persistent development gap between African countries and advanced economies.