THE EFFECT OF HUMAN CAPITAL ON THE DYNAMICS OF INCOME INEQUALITY IN WEST AFRICA: A PANEL ARDL-PMG APPROACH

Abstract

This study examines the effect of human capital development on the dynamics of income inequality 
in West African economies. The research is motivated by the persistent coexistence of improving human capital indicators and high inequality levels. The study adopts a quantitative research design utilising the Panel Autoregressive Distributed Lag Pooled Mean Group (PARDL-PMG) method. 
The population comprises annual macroeconomic panel data for 14 West African countries, yielding 434 total observations. Pesaran cross-sectional dependence testing, CIPS unit root testing, and Westerlund cointegration testing confirmed the appropriateness of Panel ARDL estimation. The empirical results reveal that the long-run coefficient on human capital is statistically insignificant, whilst per capita income emerges as the dominant inequality-reducing mechanism. The error-correction term confirms a stable long-run equilibrium with an approximately 35.7 per 
cent annual adjustment speed. The study concludes that human capital investment requires complementary institutional reforms, financial inclusion expansion, and labour market formalisation to effectively reduce income inequality in West Africa, and recommends integrated policy reforms combining education investment, institutional strengthening, labour formalisation, and redistributive measures.