Relationship between Income Inequality and Economic Productivity: A Cross-Country Analysis
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This analysis attempts to find the relationship between economic productivity and income inequality. Previous literature has produced mixed results, with some analyses finding a positive correlation and some finding a negative explanation, as to how income inequality affects economic performance. This study uses single and multiple linear regression analysis to uncover the relationship between the two variables. Mixed results were produced in accordance with previous studies, with models 1 through 3 finding that income inequality does not reduce economic growth. Models 4 through 6 find the opposite to be true, and that there is a negative relationship between income inequality and economic growth. Specific attention was given to a country’s stage of development as outlined by the dummy variable used in the study.