Income Inequality as a Determinant of Economic Growth: A Cross-Country Analysis
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In this study, we seek to find a relationship between income inequality and economic growth. Despite years of extensive research dedicated to finding a relationship between the two, past studies and existing literature still remain divided on the subject, with some finding a positive relationship and others declaring a negative relationship. This paper examines the effects of inequality on GDP by using data of 225 countries from 2011. Using this data, simple and multiple linear regression models were formed to determine the relationship between the two variables. Through empirical analysis, we found that statistical inference tests supported all variables. This study found a positive relationship between income inequality and economic growth. If further study is pursued, it should consider evaluating countries separately based on whether they are developed or developing, and testing different explanatory variables.