Promoting regional income equity under structural transformation and climate change: An economywide analysis for Senegal

This study addresses the problem of regional income inequality in Senegal, a typical African country characterized by significant regional developmental disparities that risk widening due to ongoing structural transformation and the uneven effects of climate change. While most development policy studies in Africa focus on national-level growth and poverty reduction, regional income inequality receives much less attention. To fill this gap, we develop a regionalized economy-wide model of Senegal, incorporating endogenous interregional migration from underdeveloped agrarian provinces to the industrialized capital. We examine three scenarios: (1) a business-as-usual structural transformation where economic growth in the capital outpaces agrarian provinces; (2) climate change disproportionately affecting agrarian regions; and (3) accelerated growth alternatives aimed at mitigating regional income divergence. Our simulations reveal that climate change can exacerbate the baseline income divergence between agrarian regions and the capital, with the Central region being particularly vulnerable. Unrestricted rural outmigration, though beneficial for rural households, is insufficient to prevent income divergence between the capital and the rest of the country. We find that the most equitable policy is to support agriculture in the provinces, as it is more beneficial for poor rural migrants than investing in the capital's economy or supporting non-agricultural sectors in the provinces. These findings thus support proponents of agriculture-led development in Africa, as it is a more effective strategy for smoothing growing regional income disparities.