Revisiting the Nexus Between Trade Liberalisation and Income Inequality: The Case of Sub‐Saharan African Countries

ABSTRACT This paper examines the impact of trade liberalisation on income inequality across 24 Sub‐Saharan African (SSA) countries from 2000 to 2020. Using IV‐Tobit and 2SLS models, we consistently find that greater trade openness significantly exacerbates inequality in the region. Critically, we document an inverted U‐shaped relationship between trade and inequality—similar to the Laffer Curve—but this mitigating effect is only observed in high‐income, less corrupt, and democratic SSA countries. In addition, trade openness demonstrates a dual, contradictory effect on inequality: the disruptive impact on employment significantly outweighs the mitigating effect of the education channel. This disparity underscores that without robust labour market and social protection policies, the negative employment consequences of trade liberalisation will dominate the potential equalising gains from human capital development.