Industrial and service sectors’ growths: an empirical investigation of the effects on income inequality in Nigeria

This study empirically investigated the implications of industrial and service sectors’ growths on income inequality in Nigeria from 1985 to 2022, using data sourced from the Central Bank Nigeria Statistical Bulletin and the World Bank’s Development Indicators. The causal variables which include growth rates in the construction, manufacturing, mining and service sectors were regressed on Gini index as proxy for income inequality. The Autoregressive Distributed Lag (ARDL) estimation procedures were employed. The pre-diagnoses of Kwiatkowski-Phillips-Schmidt-Shin (KPSS) unit root revealed I(1) and I(0) mixed orders of integrations and the ARDL bounds cointegration established a long-run equilibrium relationship among the variables. The estimated current period short-run ARDL results indicated that construction and service sub-sectors’ growth rates had positively significant influences on the level of income inequality in Nigeria, growth rate in the manufacturing sub-sector exerted negatively significant effect and that of mining sub-sector positively but insignificantly impressed on income inequality while the one year lagged short-run results established that all the regressors negatively and significantly influenced income inequality level in Nigeria. The long-run results revealed that while all the explanatory variables appeared positive, construction and manufacturing sub-sectors’ growth rates had insignificant effects on income inequality in Nigeria. These findings were validated by the applied post-diagnostic tests. The study concluded that the immediate past year’s growth rates of the industrial and service sectors significantly moderated income inequality in Nigeria during the sampled period. It is consequently recommended among others that government should encourage reinvestment of economic growth gains from the referred sectors to ensure employment driven growth performances for sustained curtailing of income inequality in Nigeria. Keywords: Industrial Sub-sector, Service Sub-sector, Sub-sectors’ Growths, Income Inequality, Autoregressive Distributed Lag (ARDL) Procedures, Nigeria.