The Paradox of the Isolated Poor: An Empirical View on the Political Economy of Capital City Isolation in Sub-Saharan Africa

Abstract: Staggering income inequality is one of the major challenges for economic development in Sub-Saharan Africa. Accordingly, understanding the underlying mechanisms that cause and maintain this inequality is key for developing effective policies targeting the economic underperformance and poverty on the continent. In this study, we investigate the implications of capital city isolation in Sub-Saharan African countries by combining micro-level evidence from newly available remote sensing data and geocoded Afrobarometer survey data. Our results consistently indicate that isolation from the capital city has significant adverse implications for both the level and pace of economic development and additionally entails a decreased provision of public goods. However, people in areas farther isolated from the capital city concurrently exhibit a higher level of trust and a better evaluation of the performance of their political leaders. Further analyses reveal that this paradoxical finding - the paradox of the isolated poor - might lie at the very core of the adverse effects of capital city isolation. Indeed, our results suggest that reduced accountability and monitoring of the political elite caused by a decreased availability of information provided through media channels as well as a lower level of democratization, identification with the state and education are the major determinants of the limited economic development in areas isolated from the capital city. We show that our findings are robust with respect to a range of alternative specifications and conduct a number of placebo tests to affirm causal inference. Lastly, we show that, consistent with our theory, the effects are stronger for rural as compared to urban areas.