Economic Complexity and Income Inequality in South Africa: The Moderating Roles of Human Capital and Institutional Quality

The paper examines the impact of economic complexity (EC) on income inequality in South Africa using Autoregressive Distributed Lag (ARDL) estimation techniques from 2000 to 2025. The study utilises principal component analysis (PCA) to generate the EC index from sub-indices, including trade and technology EC. The study also evaluates the Kuznets curvilinear effect and assesses the moderating roles of human capital and institutional quality on the relationship between EC and income inequality in South Africa. The results indicate a monotonic relationship. The calculated vertices of 1.67 for the short run and 1.55 for the long run lie outside the observed EC data range of 0.00–1.30. Therefore, within the sample, a negative relationship between income inequality and EC is observed. The results also indicate that human capital and institutional quality amplify the income-inequality-reducing effect of economic complexity in South Africa. Based on these results, policy recommendations are proposed to address the identified issues.