Impact of Economic Inequality on GDP Growth

Abstract

The relationship between inequality and growth is an important and controversial relationship in economic theory. Drawing from previous literature, this study seeks to test the commonly held theory that inequality and growth are negatively related. The study was undertaken using panel data taken from 62 countries from around the world, adjusting for factors such as standard growth models, development indexes, education, and income per capita. Our findings appear contrary to our expectations and literature, showing a significant positive relation between growth and inequality. Our findings suggest the need for further investigation into this relationship, before policy decisions can be made.