Do Capital Accumulation, Globalisation, and Institutions Reduce Income Inequality Within the Kuznets Hypothesis in Nigeria?

Abstract

Thus, this study investigates how capital accumulation (through human and physical capital), globalisation, and institutions worsen income inequality within the Kuznets framework in Nigeria. The data were sourced from the UNU-WIDER World Income Inequality Database (WIID), the Central Bank of Nigeria (CBN) Public Finance and Real Annual Statistical Bulletin, the KOF Globalisation Index, and the World Development Indicators (WDI). The results employed the ECM-ARDL, Granger 
causality, and FMOLS frameworks, revealing that the per capita growth rate, the square of the per capita growth rate, education expenditures, gross fixed capital formation, and institutions worsen income inequality in the long-run. However, health expenditures and globalisation have a positive impact on income inequality in the long run, whereas health expenditures and gross fixed capital formation reduce it in the short run. Moreover, the long-run and short-run results are consistent with the FMOLS robustness test. In contrast, the Granger causality test indicates unidirectional causality from gross fixed capital formation, globalisation, and institutions, suggesting that institutional changes have a predictive 
reverse short-run effect on inequality and public capital investment. Thus, policy recommendations were discussed based on the findings.