Exploring the Relationship Between Inequality and Economic Growth

Ossai, Lucky; Bhattarai, Keshab

Abstract

The studies on the relationship between income inequality and economic growth attract a lot of interest, particularly in low-income countries like Nigeria. While some scholars posit that income inequality stimulates economic growth, others argue that it has a negative effect, and that it leads to a rise in the poverty level of a country. This study examines the empirical relationship between income inequality and economic growth in Nigeria by assessing whether an inverted U-shaped connection exists between the two variables, as predicted by the Kuznets hypothesis. This study employs the Autoregressive Distributed Lag (ARDL) model for this analysis, and the findings indicate an inverted U-shaped relationship in the short-run. The research further reveals that inflation and the real exchange rates exhibit a statistically significant and negative correlation with income inequality in the long-run. Likewise, evidence suggests that political stability has a statistically significant positive long-term correlation with income inequality while in the short-term, it seems to improve income inequality in Nigeria. Additionally, in the short run, the real exchange rates reveal a statistically significant association and exacerbates income inequality.

Citation

Ossai, L., & Bhattarai, K. (2024). Exploring the Relationship Between Inequality and Economic Growth. Journal of Development Economics and Finance, 5(1), 211-233. https://doi.org/10.47509/JDEF.2024.v05i01.10

• Journal Article Type: Article
• Acceptance Date: Jun 12, 2024
• Online Publication Date: Jun 27, 2024
• Publication Date: 2024
• Deposit Date: Jun 26, 2024
• Publicly Available Date: Jul 8, 2024
• Journal: Journal of Development Economics and Finance
• Publisher: ARF India
• Peer Reviewed: Peer Reviewed
• Volume: 5
• Issue: 1
• Pages: 211-233
• DOI: https://doi.org/10.47509/JDEF.2024.v05i01.10
• Keywords: Inequality; Economic growth; Gini coefficient; Kuznets curve
• Public URL: https://hull-repository.worktribe.com/output/4719483