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Is There Causality Relationship Between Economic Growth And Income Inequality?: Panel Data Evidence From Indonesia

Author

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  • Khairul Amri

    (Syiah Kuala University&State Islamic University Ar-Raniry, Indonesia)

  • Nazamuddin

    (Syiah Kuala University, Indonesia)

Abstract

Our study aims to determine the causality relationship between economic growth and income inequality. Using panel data set of 26 provinces from Indonesia for a period of 2005 to 2015, Pedroni's co-integration test, Panel Vector Error Correction Model, and Granger Causality Test were employed to analyze the relationship between the variables. Accordingly, the first main finding of the research is that there is a negative and significant relationship between the economic growth and income inequality in the long-run. Secondly, in the short run, the economic growth is positively and insignificantly related to income inequality. In addition, there is a unidirectional causality running from income inequality to economic growth.

Suggested Citation

  • Khairul Amri & Nazamuddin, 2018. "Is There Causality Relationship Between Economic Growth And Income Inequality?: Panel Data Evidence From Indonesia," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 6(2), pages 8-20.
    • Handle: RePEc:ejn:ejefjr:v:6:y:2018:i:2:p:8-20
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    References listed on IDEAS

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    Cited by:

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    2. Paulina Permatasari & Assyifa Szami Ilman & Carol Ann Tilt & Dian Lestari & Saiful Islam & Rita Helbra Tenrini & Arif Budi Rahman & Agunan Paulus Samosir & Irwanda Wisnu Wardhana, 2021. "The Village Fund Program in Indonesia: Measuring the Effectiveness and Alignment to Sustainable Development Goals," Sustainability, MDPI, vol. 13(21), pages 1-30, November.
    3. Hakim, Dani Rahman & Rosini, Iin, 2022. "Regional Income Inequality in Indonesia: The Role of Public and Private Investment," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 56(3), pages 87-101.
    4. Nasfi Fkili Wahiba & Mahmoudi Dina, 2023. "Technological Change, Growth and Income Inequality," International Journal of Economics and Financial Issues, Econjournals, vol. 13(1), pages 121-131, January.
    5. Jun Zhao & Xiucheng Dong & Kangyin Dong, 2021. "Can agglomeration of producer services reduce urban–rural income inequality? The case of China," Australian Economic Papers, Wiley Blackwell, vol. 60(4), pages 736-762, December.
    6. Tsun Se Cheong & Guanghua Wan & David Kam Hung Chui, 2022. "Unveiling the Relationship between Economic Growth and Equality for Developing Countries," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(5), pages 1-28, September.
    7. Theodora Sotiropoulou & Stefanos Giakoumatos & Antonios Georgopoulos, 2023. "Financial development, economic growth, and income inequality: a Toda-Yamamoto panel causality test," Economics and Business Letters, Oviedo University Press, vol. 12(2), pages 172-185.
    8. Serhat Alpağut, 2025. "The Relationship between Income Distribution, Inflation and Economic Growth: Examining the Asymmetric Relationship Based on the Kuznets Hypothesis with Fourier Functions," Journal of Research in Economics, Politics & Finance, Ersan ERSOY, vol. 9(4), pages 656-677.

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