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

Author

Listed:
  • 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.

Suggested Citation

  • Amina Tabassum & M. Tariq Majeed, 2008. "Economic Growth and Income Inequality Relationship: Role of Credit Market Imperfection," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(4), pages 727-743.
    • Handle: RePEc:pid:journl:v:47:y:2008:i:4:p:727-743
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    Citations

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    Cited by:

    1. Majeed, M Tariq, 2011. "Trade, Poverty and Employment: Empirical Evidence from Pakistan," MPRA Paper 45077, University Library of Munich, Germany.
    2. Aramish Altaf Alvi & Abid Raza Khan & Tariq Hussain, 2024. "Can Piketty’s Interest Rate – Growth Rate Framework Explain Increasing Income Inequality in Pakistan?," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 13(1), pages 821-829.
    3. Salim Chahine & Adam Chahine, 2024. "COVID-19 Crisis and the Association Between Inequality and Economic Growth," Journal of Interdisciplinary Economics, , vol. 36(2), pages 246-261, July.
    4. 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.
    5. Ghulam MOHEY-UD-DIN* & Muhammad Wasif SIDDIQI**, 2017. "GDP FLUCTUATIONS AND LONG-RUN ECONOMIC GROWTH: A Study of Selected South Asian Countries," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 27(1), pages 41-66.
    6. Prashant Kumar Choudhary & Priyanka Saharia, 2023. "Global income inequality and measuring values with the world values survey," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 25(1), pages 103-122, June.
    7. 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.
    8. Nazifi Abdullahi Darma & Muhammad Ali, 2014. "An Empirical Analysis of the Effect of Income Inequality on Economic Growth in West Africa," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 3(4), pages 221-231.

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