INCOME INEQUALITY AND ECONOMIC GROWTH: AN ECONOMETRIC ANALYSIS OF OECD COUNTRIES (2005-2018)

Year 2021, Volume: 14 Issue: 2, 80 - 95, 31.12.2021

Durim Selmonaj Fisnik Morina , Ercan Özen , Simon Grıma

Abstract

The aim of this paper is to explore how income inequality affects economic growth and to determine the other effects of income inequality. We used secondary data provided from the reports of the central banks of the OECD member countries and then subject them to trend analysis and 4 analysis methods, specifically; fixed effect regression method, random effect, Hausman-Taylor estimation and Arellano-Bond estimation. Based on empirical results we can conclude that income inequality, poverty rate and unemployment have significant effects on the economic growth of a country.

Keywords

Income inequality, Economic growth, unemployment, poverty rate

References

• Amadeo, K. (2020, May 28). The Balance. Retrieved from https://www.thebalance.com/causes-of-unemployment-7-main-reasons-3305596
• Asthana, S. (2009). Health and Development. Retrieved from ScienceDIrect: https://www.sciencedirect.com/science/article/pii/B9780080449104003369#!
• Bala, S. (2016, July 11). BussinesMag.al. Retrieved from Bussines Magazine: https://businessmag.al/blog/cfare-eshte-inflacioni/
• Bernhard, E., & Zilcha, I. (2015). The Economics of Screening and Risk Sharing in Higher Education: Human Capital Formation, Income Inequality, and Welfare. Academic Press is an imprint of Elsevier.
• Brueckner, M., & Lederman, D. (2017). Inequality and GDP per capita: The Role of Initial Income. Acton: World Development Indicators.
• Cingano, F. (2014). Trends in Income Inequality and its Impact on Economic Growth. Paris: OECD Publishing.
• Dabla-Norris, E., Kochhar, K., Kalpana, N., Ricka, F., & Tsounta, E. (2015, June). Causes and Consequences of Income Inequality: A Global Perspective. Retrieved from International Monetary Fund : https://www.imf.org/external/pubs/ft/sdn/2015/sdn1513.pdf
• Eberstadt, N. (2008). The Poverty of the Poverty Rate: Measure and Mismeasure of Material Deprivation in Modern America. Washington DC: The AEI Press.
• Floyd, D. (2020, June 24). Measuring Inequality: Forget Gini, Go With the Palma Ratio Instead. Retrieved from Investopedia: https://www.investopedia.com/news/measuring-inequality-forget-gini-go-palma/
• FOCUS-ECONOMICS. (n.d.). What is GDP per capita? Retrieved from Focus-Economics: https://www.focus-economics.com/economic-indicator/gdp-per-capita
• Gilbert, D. (2015). ScienceDIrect. Retrieved from Income Inequality: https://www.sciencedirect.com/science/article/pii/B9780080970868320736
• Harris, J., & Todaro, M. (1970). Migration, Unemployment and Development: A Two-Sector Analysis. The American Economic Review, 126-141.
• Heise, A. (2006). The Political Economy of Meritocracy:. Hamburg: Faculty of Economics and Social Science, Department of Politics and Economics.
• Hojjat, R., & Hojjat, T. A. (2017). The Economics of Obesity: Poverty, Income Inequality and Health. Singapore: Springer Singapore.
• Horowitz, J. M., Igielnik, R., & Kochhar, R. (2020, January 9). Pew Research Center: Social & DemoFigureic Trends. Retrieved from Trends in income and wealth inequality: https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/
• Jain, P. (2014, July 5). The Cause: Income Inequality and Unemployment. Retrieved from QRIUS: https://qrius.com/cause-income-inequality-unemployment/
• Jones, C. I., & Vollrath, D. (2013). Introduction to Economic Growth. W. W. Norton & Company.
• Keely, B. r. (2015). Income Inequality : the Gap Between Rich and Poor. Paris: OECD Publishing.
• Kenton, W. (2020, October 30). Endogenous Variable. Retrieved from Investopedia: https://www.investopedia.com/terms/e/endogenous-variable.asp
• Keynes, J. M. (2018, July 17). The General Theory of Employment Re-Stated. Retrieved from Springer Link: https://doi.org/10.1007/978-3-319-70344-2_18
• Kopp, C. M. (2020, June 17). Income Inequality: What Is Income Inequality? Retrieved from Investopedia: https://www.investopedia.com/terms/i/income-inequality.asp
• Kuznets, S. (1955). Economic Growth and Income Inequality. American Economic Association.
• Kwasi Fosu, A. (2018). Economic Structure, Growth, and Evolution of Inequality and Povertyin Africa: An Overview. Legon: Journal of African Economies.
• Lederman, D. (2015, July 9). How does income inequality affect economic growth? Retrieved from World Economic Forum: https://www.weforum.org/agenda/2015/07/how-does-income-inequality-affect-economic-growth/
• Malinen, T. (2015, December 17). The Economic Consequences of Income Inequality. Retrieved from huffpost: https://www.huffpost.com/entry/the-economic-consequences_b_8827634
• Moyo, D. (2018). Edge of Chaos: Why Democracy Is Failing to Deliver Economic Growth - and How to Fix It. New York: Basic Books.
• Murray, C. (1998). Income Inequality and IQ. Washington DC: THE AEI PRESS.
• Neaime, S., & Gaysset, I. (2017). Financial Inclusion and Stability in MENA: Evidence from Poverty and Inequality. Beirut: Finance Research Letters.
• OECD. (2009). Poverty rates and poverty gaps. Paris: OECD Publishing.
• Ono, T. (2018). GROWTH, UNEMPLOYMENT, AND FISCAL POLICY: A POLITICAL ECONOMY ANALYSIS. Macroeconomic Dynamics, 2-41.
• Oscar, L. (1998). The culture of poverty.
• Paganetto, L. (2014). Wealth, Income Inequalities, and DemoFigurey. Rome: Tor Vergata Foundation for Economic.
• Pettinger, T. (2016, November 28). Poverty, Income Inequality and Economic Growth. Retrieved from Economicshelp: https://www.economicshelp.org/macroeconomics/inequality/poverty-inequality-economic-growth/
• Piketty, T. (2015). The Economics of Inequality. Harvard University Press.
• Sachs, J. (2006). The End of Poverty: Economic Possibilities for Our Time. New York: THE PENGUIN PRESS.
• Selmonaj, D. & Morina, F. (2021), The Effect Of Unemployment On The Crıme Rate: Comparatıve Analysıs Between Western Balkan Countrıes And Selected Eu Countrıes (2012 - 2018). Sibernik: Odyssey Conference. 12th International Odyssey Conference on Economics and Business Šibenik, Croatia – June 9-12, 2021.
• Silber, J. (1999). Handbook of income inequality measurement. Springer Netherlands.
• Yunus, M. (2008). Creating a World Without Poverty: Social Business and the Future of Capitalism. New York: Public Affairs.
• Yunus, M., & Karl, W. (2017). A World of Three Zeros: The New Economics of Zero Poverty, Zero Unemployment, and Zero Net Carbon Emissions. New York: PublicAffairs.
• Ziliak, J. P. (2005). Understanding Poverty Rates and Gaps: Concepts, Trends, and Challenges. Hanover: PO Box 1024.GFBG