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Economic Growth and Income Inequality Relationship: Role of Credit Market Imperfection

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Author Info

  • Amina Tabassum

    (Economics Department, Quaid-i-Azam university, Islamabad.)

  • M. Tariq Majeed

    (Economics Department, Quaid-i-Azam university, Islamabad.)

Abstract

This paper examines the empirical relationship between economic growth and income inequality both at aggregate and regional level using more comparable data set for 69 developing countries over the period 1965-2003. The study identifies credit market imperfection in low-income developing countries as the likely reason for a strong negative relationship between income inequality and economic growth. While in short run the relationship between growth and income inequality might be positive but over time more income inequalities reduces economic growth. Moreover, this paper finds evidence that more physical and human capital investment, openness to trade and higher government spending have statistically significant impact on enhancing economic growth and reducing inequality.

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Bibliographic Info

Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

Volume (Year): 47 (2008)
Issue (Month): 4 ()
Pages: 727-743

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Handle: RePEc:pid:journl:v:47:y:2008:i:4:p:727-743

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Related research

Keywords: Economic Growth; Income Inequality; Poverty; Credit Market Imperfection; Trade Openness;

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Cited by:
  1. Bántó Norbert, 2012. "Forms Of Cross-Border Tourist Co-Operation In The Bihor-Hajdú-Bihar Euroregion," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 229-235, July.
  2. Burz Razvan & Bogdan Ion Boldea, 2012. "Sustainability Of Economic Growth And Inequality In Incomes Distribution," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 249-254, July.
  3. Majeed, M Tariq, 2011. "Trade, Poverty and Employment: Empirical Evidence from Pakistan," MPRA Paper 45077, University Library of Munich, Germany.

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