The Consumption, Income, and Wealth of the Poorest

This paper provides new empirical
insights on the joint distribution of consumption, income,
and wealth in three of the poorest countries in the world —
Malawi, Tanzania, and Uganda — all located in Sub-Saharan
Africa (SSA). The first finding is that while income
inequality is similar to that of the United States (US),
wealth inequality is barely one-third that of the US.
Similarly, while the top of the income distribution (1 and
10 percent) earns a similar share of total income in SSA as
in the US, the share of total wealth accumulated by the
income-rich in SSA is one-fifth of its US counterpart. The
main contributions of the paper are to document: (i) this
dwarfed transmission from income to wealth, which suggests
that SSA households face a larger inability to save and
accumulate wealth compared with US households; and (ii) a
lower transmission from income to consumption inequality,
which suggests the presence of powerful institutions that
favor consumption insurance to the detriment of saving.
These features are more relevant for rural areas, which
represent roughly four-fifths of the total population. The
paper identifies the few successful pockets of the SSA
population that are able to accumulate wealth by exploring
sources of inequality such as age, education, migration,
borrowing ability, and societal systems.