Economic Growth & Income Inequality: A revised cross-sectional econometric analysis of the global impact of income inequality on economic growth around the world
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After decades of investigation there is an abundance of research dedicated to the relationship between income inequality and economic growth. The research emphasizes the relationship primarily for developed countries with a renewed focus on the developing world. This paper examines the effects of inequality on GDP per capita growth from 2007 to 2012 for all countries with available data and compares that relationship to other impactful factors on economic growth. These other factors include savings rate, fertility rate, and the unemployment rate. Through empirical analysis we found income inequality represented by the Gini coefficient to be very significant throughout all the models tested, and the savings rate and fertility rate proved significant at the 5% level. Also, the unemployment rate proved completely insignificant to economic growth. These results proved that the relationship between economic growth and income inequality is overall positive and highly correlated.