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The Inequality–Growth Nexus in Sudan: Insights from an ARDL Approach

The Inequality–Growth Nexus in Sudan: Insights from an ARDL Approach

A paper by Mohamed Elhaj Mustafa (University of Khartoum), with the support of CEDEJ Khartoum

 

  • Can Sudan Grow While Inequality Rises?

Sudan stands at a crossroads. The country urgently needs economic growth to rebuild after decades of conflict, sanctions, and political instability, but it is trying to do so in a context of deep and persistent inequality. Understanding how these two forces interact is not just an academic question. It is central to whether recovery efforts will create broad‑based prosperity or reinforce the same divides that helped fuel past crises.​ As of 2025, with ongoing conflict exacerbating these issues, the stakes are higher than ever.

This study examines Sudan’s economy from 1980 to 2022 using the Autoregressive Distributed Lag (ARDL) model to analyze both the short-run and long-run relationships among key economic variables. The study  asks a simple but important question: does income inequality help or hinder economic growth in Sudan, both in the short run and over the long haul? The answer that emerges is clear. While inequality may appear harmless—or even mildly helpful—over very short horizons, it ultimately acts as a drag on long‑term growth in a fragile, low‑income country like Sudan.​

  • A Fragile Economy Under Extreme Stress

To see why this matters, it helps to recall where Sudan’s economy is coming from. Over the past decades, Sudan has experienced repeated shocks: long civil wars, the loss of oil revenues after South Sudan’s secession in 2011, international sanctions, periodic macroeconomic crises, and chronic governance weaknesses. These structural problems were brutally compounded by the war that erupted in April 2023 between the Sudanese Armed Forces and the Rapid Support Forces.​

The human and economic toll has been staggering. Millions have been displaced, infrastructure has been destroyed, and output has collapsed. Recent estimates suggest that GDP fell by nearly a fifth in 2023 alone, with further contractions expected if the conflict continues (World Bank, 2025). Poverty has surged from roughly one‑fifth of the population to more than two‑thirds, and basic services have deteriorated sharply (Ali & Elias Suliman, 2026).​

All of this is happening against a backdrop of long‑standing inequalities between regions, between rural and urban areas, and between different social groups. Even when standard indicators such as the Gini coefficient appear moderate by international standards—around 0.34 in 2025—the lived reality in Sudan is one of sharp contrasts in access to land, jobs, education, and public investment. These divides are closely linked to patterns of conflict and political marginalization, making inequality not just an economic issue but also a driver of instability.​

  • Two Stories About Inequality and Growth

Economists have long debated whether inequality is good or bad for growth. One strand of thinking, rooted in classical and neoclassical theory, argues that some inequality can be beneficial (Bourguignon, 1981). If richer households save and invest more, then concentrating income at the top might increase the pool of funds available for capital formation. According to this view, high inequality in developing countries could theoretically support growth by financing new factories, infrastructure, and innovation.​

A second strand, which has gained traction in recent decades, paints a more pessimistic picture (Benhabib and Rustichini, 1996). In this perspective, inequality acts as a brake on development by limiting access to education and credit, fueling political tensions, and leading to policies that favor narrow elites. When poor households cannot invest in their children’s schooling or start small businesses, society wastes talent and potential productivity. High inequality can also spur unrest and crime, weaken institutions, and increase the likelihood of conflict—all of which deter investment and undermine long‑run growth.​

The global evidence suggests that the balance between these forces depends heavily on context. In high‑income countries with deep financial markets and strong institutions, the “savings and incentives” channel may sometimes dominate. In low‑income, fragile states with weak governance and limited access to finance, the negative mechanisms tend to be much stronger. Sudan clearly belongs to the latter group.​

  • A Closer Look at Sudan’s Data

To understand which story fits Sudan, this study analyzes annual data for the period 1980–2022. Real GDP (in constant 2015 US dollars) is used to track economic growth, while inequality is measured using a Gini coefficient series from the SWIID database[1]. Several other variables are included to capture key channels through which inequality might influence growth: total population (demographic pressure), education (human capital), capital formation, credit to the private sector (financial development), and exports (openness).​

All variables are converted into natural logarithms. This transformation helps stabilize variance and allows coefficients from the model to be interpreted as elasticities—that is, as percentage changes. Before estimating the relationships, we test whether each series is stationary or has to be differenced to become stable, using Augmented Dickey–Fuller and Phillips–Perron tests. The results show a mix of stationary and first‑difference stationary variables, which justifies the use of an Autoregressive Distributed Lag (ARDL) model.​

An ARDL model is useful because it can handle such mixed integration orders while clearly separating short‑run dynamics from long‑run equilibrium relationships. Once appropriate lag lengths are selected using information criteria, the study applies the ARDL bounds test and finds strong evidence of cointegration—that is, a stable long‑run relationship linking growth, inequality, and the control variables.​

  • What the Long‑Run Results Reveal

The long‑run coefficients from the ARDL model tell a straightforward story. Inequality has a statistically significant and negative effect on economic growth in Sudan. Put simply, when the Gini coefficient is higher, and stays higher, the level of real GDP is lower than it would otherwise have been. This supports the view that, in Sudan’s institutional and structural context, inequality undermines rather than supports long‑term development.​

The same long‑run estimates highlight several positive drivers of growth. Higher levels of education, measured through mean years of schooling or secondary enrolment, are associated with faster growth, reflecting the importance of human capital accumulation. Increases in the real capital stock and in credit to the private sector also contribute positively to long‑run output, suggesting that both physical investment and deeper financial intermediation matter for Sudan’s growth prospects. Exports similarly play a supportive role, pointing to the gains from greater integration into regional and global markets.​

Population, however, exerts a negative influence on GDP growth in the long run. This does not mean that people are a “burden” in any moral sense, but rather that, in Sudan’s current conditions, rapid population growth (i.e., 2.72 in 2022 according to the World Bank) has outpaced the economy’s capacity to create productive jobs and provide services. Without sufficient investment in education, health, and infrastructure, a large and growing population becomes a source of strain rather than a demographic dividend.​

  • Short‑Run Dynamics and Adjustment

One advantage of the ARDL approach is that it can also capture how the economy reacts in the short run to shocks in inequality and other variables. The estimated model for Sudan includes an error‑correction term, which measures how quickly the system moves back toward the long‑run equilibrium after a disturbance. The coefficient on this term is negative and relatively large in magnitude, implying that deviations from equilibrium are corrected rapidly—more than two‑thirds of the gap is eliminated within one year.​

The short‑run coefficients reveal a more complex pattern for inequality itself. Contemporaneous changes in the Gini coefficient do not have a significant immediate impact on GDP growth. However, lags of inequality enter with positive signs, indicating that short bursts of increased inequality can coincide with temporary growth spurts.

Yet this short‑run boost is not the end of the story. Over time, the negative channels—reduced access to education, greater social tensions, and biased policy choices—dominate, turning inequality into a drag on growth. The apparent short‑run gains thus come at the cost of weaker long‑term performance, especially when inequality remains high and persistent.​

Other short‑run results also carry policy messages. Population growth tends to raise growth in the immediate term, reflecting a temporary increase in labor supply and demand. By contrast, short‑run effects of credit, capital formation, and exports are more modest and often statistically insignificant, suggesting that their main contributions operate through long‑run accumulation rather than quick cyclical boosts.​

  • Are the Results Reliable?

No empirical model is perfect, but the study subjects its ARDL specification to a battery of standard diagnostic tests. Tests for serial correlation, heteroskedasticity, functional form, and normality of residuals all point to a well‑behaved model. Stability diagnostics indicate that parameter estimates remain stable over the sample period, despite Sudan’s many shocks. These checks do not guarantee correctness, but they increase confidence that the reported relationships are not artifacts of poor specification.​

  • Policy Lessons for a More Inclusive Recovery

What do these findings imply for Sudan’s policymakers and development partners?

First, they underline that inequality is not just a social concern; it is also an economic constraint. In a setting like Sudan, growth strategies that tolerate or even encourage large income gaps are likely to backfire over time. Rather than hoping that growth will eventually “trickle down,” policy should actively aim to broaden opportunities and reduce structural disparities.​

Second, the positive long‑run roles of education, capital, credit, and exports point to clear areas for action. Expanding access to quality schooling across regions, especially for girls and marginalized groups, can raise productivity and make growth more inclusive. Encouraging productive investment—through stable macroeconomic policies, infrastructure development, and clear property rights—can build the capital base needed for higher output. Deepening financial inclusion so that smallholders, informal workers, and micro‑enterprises can access credit would help turn savings into broad‑based investment rather than elite consumption. Finally, promoting diversified exports can reduce vulnerability to domestic shocks and create new income opportunities.​

Third, the negative long‑run effect of rapid population growth reinforces the importance of investing in health and family planning, improving women’s education and labor‑market prospects, and ensuring that demographic change is matched by job creation. Without such measures, demographic pressure may continue to strain public resources and fuel competition over scarce opportunities.​

  • Inequality and Peacebuilding

Beyond pure economics, the results speak to Sudan’s broader peacebuilding agenda. High and persistent inequality—especially when aligned with regional or ethnic lines—can heighten grievances and make conflict more likely or more protracted. By undermining growth, inequality also reduces the resources available for reconstruction and social investment, creating a vicious circle of stagnation and tension.​

Breaking this cycle requires growth strategies that are explicitly inclusive: targeting marginalized regions for infrastructure and service delivery, ensuring fair representation in decision‑making, and designing social protection systems that cushion the poorest households against shocks. Evidence that inequality undermines long‑run growth in Sudan strengthens the case for such policies not only on moral grounds but also on pragmatic economic ones.​

  • Looking Ahead

Sudan’s future remains highly uncertain, and no econometric model can fully capture the political and security developments that will shape the country’s trajectory. Still, the analysis summarized here offers an important piece of the puzzle: in a fragile, low‑income context, inequality is not the price of progress; it is a barrier to it. Sustainable recovery will require growth that lifts the many, not just the few.​

 

References:

Ali, M. E. M., & Elias Suliman, A. H. (2026). Sectoral growth and poverty reduction: evidence from Sudan’s economy. Cogent Economics & Finance14(1). https://doi.org/10.1080/23322039.2026.2630458

Benhabib, J., & Rustichini, A. (1996). Social conflict and growth. Journal of Economic Growth, 1(1), 125–142. https://doi.org/10.1007/BF00163345

Bourguignon, F. (1981). Pareto-superiority of unegalitarian equilibria in Stiglitz’ model of wealth distribution with convex saving function. Econometrica, 49(6), 1469–1475. https://doi.org/10.2307/1911412

World Bank. (2025, May). Sudan economic update: The economic and social consequences of the conflict: Charting a path to recovery. Eastern and Southern Africa Region, Economic Policy. https://documents1.worldbank.org/curated/en/099051925180542315/pdf/P178527-6a7d4d70-52be-49b7-87e5-ead89050a99b.pdf

 

 

[1] SWIID (Standardized World Income Inequality Database) is a widely used dataset developed by Frederick Solt that provides comparable Gini indices of income inequality (both market and disposable/net income) for 192+ countries from 1960 to present. It standardizes data from sources like Luxembourg Income Study (LIS), national statistics, and scholarly studies using imputation methods to maximize cross-national comparability while maintaining broad coverage—ideal for global inequality research


OpenEdition vous propose de citer ce billet de la manière suivante :
cedejsudan (10 mars 2026). The Inequality–Growth Nexus in Sudan: Insights from an ARDL Approach. Researching Sudan - A perspective on contemporary Sudan. Consulté le 17 avril 2026 à l’adresse https://doi.org/10.58079/15ufo


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