The Effects of Income Inequality and Poverty on Economic Growth
(2020) EKHS22 20201Department of Economic History
- Abstract
- During the last decades, extreme poverty has been declining globally while income inequality within countries has, in the developing world, been increasing. While the reduction of income inequality and poverty can be seen as crucial targets for development intrinsically, they might also have economic impacts. Existing empirical research and theory suggest that income distribution affects economic growth. The aim of the thesis is to compare the effects of income inequality and poverty on GDP per capita growth. These objectives are investigated using cross-country regressions of 46 developing countries between 1980 and 2018. The results indicate a weak negative short to medium-run effect of income inequality on growth. However, the results... (More)
- During the last decades, extreme poverty has been declining globally while income inequality within countries has, in the developing world, been increasing. While the reduction of income inequality and poverty can be seen as crucial targets for development intrinsically, they might also have economic impacts. Existing empirical research and theory suggest that income distribution affects economic growth. The aim of the thesis is to compare the effects of income inequality and poverty on GDP per capita growth. These objectives are investigated using cross-country regressions of 46 developing countries between 1980 and 2018. The results indicate a weak negative short to medium-run effect of income inequality on growth. However, the results are sensitive to regional effects and are not robust to alternative inequality measures. Poverty is not found to affect GDP per capita growth. Thus, the results suggest income inequality to affect economic growth more than poverty in the short to medium-run, but due to the sensitivity of the results no robust conclusions can be drawn. The lack of robust results may be caused by the overlap of the two concepts and the similar theoretical channels through which both variables affect economic growth. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9021236
- author
- Kesti, Eline LU
- supervisor
- organization
- course
- EKHS22 20201
- year
- 2020
- type
- H2 - Master's Degree (Two Years)
- subject
- keywords
- Income inequality, Poverty, Economic Growth
- language
- English
- id
- 9021236
- date added to LUP
- 2020-07-03 11:59:41
- date last changed
- 2020-07-03 11:59:41
@misc{9021236,
abstract = {{During the last decades, extreme poverty has been declining globally while income inequality within countries has, in the developing world, been increasing. While the reduction of income inequality and poverty can be seen as crucial targets for development intrinsically, they might also have economic impacts. Existing empirical research and theory suggest that income distribution affects economic growth. The aim of the thesis is to compare the effects of income inequality and poverty on GDP per capita growth. These objectives are investigated using cross-country regressions of 46 developing countries between 1980 and 2018. The results indicate a weak negative short to medium-run effect of income inequality on growth. However, the results are sensitive to regional effects and are not robust to alternative inequality measures. Poverty is not found to affect GDP per capita growth. Thus, the results suggest income inequality to affect economic growth more than poverty in the short to medium-run, but due to the sensitivity of the results no robust conclusions can be drawn. The lack of robust results may be caused by the overlap of the two concepts and the similar theoretical channels through which both variables affect economic growth.}},
author = {{Kesti, Eline}},
language = {{eng}},
note = {{Student Paper}},
title = {{The Effects of Income Inequality and Poverty on Economic Growth}},
year = {{2020}},
}