The impact of income inequalities on economic growth

Łukasz Topolewski

DOI: http://dx.doi.org/10.12775/EiP.2020.024

Abstract


Motivation: The problem of income inequalities is a growing one, worldwide. Therefore, it should be investigated how this phenomenon affects the prospects of productivity increase in a particular economy. The answer to this problem will also decide whether the reduction of income inequalities in a society ought to be the main focus of instituted economic policies.

Aim: The purpose of the article is to determine the character of the relationship between income inequality and economic growth, and decide whether income inequalities have a positive or negative impact on economic growth. To this end, a theoretical analysis and review of existing research were conducted. Afterwards, an attempt to verify the above-mentioned relationship empirically with the use of dynamic panel models was made. The period covered by the study is 2001–2018. Data were obtained from Eurostat and World Bank databases.

Results: The study found that there was a statistically significant, negative relationship between income inequalities (measured by the Gini coefficient) and economic growth in the sample group. The results of this study do not differ from the results of other authors who verified the above relationship for other sample groups.


Keywords


income inequalities, economic growth, dynamic panel models

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References


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