Non-farm income's share of the rural economy is expected to reach nearly two-thirds by 2012, which makes the, India is the second largest consumer of gold in the world, with a cultural affinity stretching back centuries. However, there are indications that effect of inequality on growth may be different in the nineties when compared to the seventies. ess and appropriateness of economic and public policy; and on social and economic inclusion, especially access to public goods and infrastructure. suggests vigorous policy decisions to modernise the rural economy and boost rural employment. Please note that corrections may take a couple of weeks to filter through The Gini coefficient has been used as inequality measure and ten-years averages of the data have been computed in order to reduce the problem linked to the limited variability of the Gini coefficient across time. This paper investigates whether the relationship between income inequality and growth changes over time. The researchers measured this across two major categories of ". ", Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. growth and the long-run level of GDP per capita. But inequality also hurts the middle class because inequality hurts growth. CAMBRIDGE – As the neoliberal epoch draws to a close, two statistical facts stand out. Join ResearchGate to find the people and research you need to help your work. The aim of this work is to analyze the relationship between inequality and economic growth. Using the panel data, Barro (2000) shows that the effect of income inequality on economic growth is negative in countries with GDP per capita below 2070, and is conversely positive in countries with GDP per capita over 2070. growth story a whole new development spin. You can help correct errors and omissions. More importantly, the Start-up India programme offers a, great opportunity to develop rural entrepreneurship and provide new avenues of meeting aspirations of, innovation, value-addition and inculcate the spirit of entrepreneurship among those who are dependent, investment, and the benefits of these will be f, At the policy-making level, the emphasis needs to, numbers but fizzles out after the campaign. If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form . All content in this area was uploaded by Rajesh Shukla on Jan 09, 2019, Impact of GDP growth on income inequality. This analysis revealed one particularly strong pattern: countries where income inequality increased more also suffered slower growth. A statistically significant relationship between inequality and growth in either time period fails to emerge. Poverty and inequality imply absence of social justice. This has led many to question if it is even possible to accomplish the 8% GDP growth that is widely quoted. “Amongst 80 countries, China ranks in the top decile in terms of GDP growth and also income growth,” Fosu said. Income inequality can be reduced by higher income tax in a near steady state. Impact of GDP growth on income inequality . Indeed, the concomitant rise in GDP per capita and income inequality does not, per se, imply any causal relationship from the former to the latter. Dr. Rajesh Shukla is director & CEO, People. New evidence using Australian taxation statistics, Daniel Halter & Manuel Oechslin & Josef Zweimüller, 2014. Authors such as Persson and Tabellini (1991) or Alesina and Rodrik (1994), in fact, find evidence of a negative relationship between the two variables of interest; on the contrary, Li and Zou (1998) and Forbes (2000) find that greater inequality is associated with faster economic growth. This allows to link your profile to this item. Inclusive growth goes far beyond monetary income and encapsulates equity, stability, respect for diversity, equality of opportunity, and participation in the development process; we still score poorly on many of these measures. The value ranges from 1.2 to 1.5; this means that a 1% increase in inequality within a country would be followed by a more than proportional increase in the rate of economic growth in the following ten years. Income inequality has both economic and political impacts on a nation. Our country’s Gross Domestic Product or GDP growth has been steady ever since the fluid economic policies of 1991. The Indian economy has come a long way, with the country’s GDP crossing the $2 trillion mark in 2014. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation. Considering the consumer credit as a driver of economic growth, we remember that not long ago that its introduction has much advantage to imported products, to the detriment of national production, it is one cause of many others that led the government to freeze this type of credit in 2009. traditional view of rural economy outmoded. India and Income Inequality. Ra je sh S h uk la | T he F in an ci al E xp re ss | Fe br ua ry 0 5, 2 0 16 0 9: 42 a m . We examine the effects of income inequality on economic growth. In the long-run co-integration analysis economic growth is found to be statistically significant, and if income inequality is increased by one percent, real GDP will grow by 13.8 percent. The present work considers two samples of OCSE countries; in the full sample 33 countries are analyzed for the 1971-2010 period and inequality data are taken from the UNU-WIDER dataset. Public profiles for Economics researchers, Various rankings of research in Economics & related fields, Curated articles & papers on various economics topics, Upload your paper to be listed on RePEc and IDEAS, RePEc working paper series dedicated to the job market, Pretend you are at the helm of an economics department, Data, research, apps & more from the St. Louis Fed, Initiative for open bibliographies in Economics, Have your institution's/publisher's output listed on RePEc. Does income inequality feed the Dutch disease? ", Aghion, Philippe & Caroli, Eve & García-Peñalosa, Cecilia, 1999. True, in a majority of OECD countries, GDP growth over the past two or three decades has been associated with growing income disparities. It identifies problematic areas like the farm and non-farm sectors, rural infrastructure, sectoral and direct employment programmes, decentralisation of government, shrinking opportunities for rural women and trade openness in the agriculture sector. All material on this site has been provided by the respective publishers and authors. Trends over the last 30 years show income inequality … For the median country in the world, that in the year 2015 had a PPP GDP per capita of around US$10,000, inequality has a significant negative effect on transitional growth: a 1 percentage point increase in the Gini decreases GDP per capita ", Daniel Halter & Manuel Oechslin & Josef Zweimüller, 2011. On the other hand, greater equality helped increase GDP per capita in Spain, France and Ireland prior to the crisis. General contact details of provider: http://edirc.repec.org/data/lisprlu.html . The remainder of the paper is organized as follows. The 21st century has witnessed an annual average GDP growth of 6% ... Maldives is continuing to augur strong growth. This will be the first ‘baseline’ master data platform on which subsequent data platforms will ride. just seven years. It is also undergoing rapid change, a trend that could have profound implications for its economic power, influence in the world and demand for gold. In the literature, a consistent negative effect of inequality on growth is documented altho… Research efforts have offered mixed conclusions so far and the growth and inequality question has been at the centre of a long-standing controversy among economists (Dollar et al. ResearchGate has not been able to resolve any citations for this publication. http://www.lisdatacenter.org/wps/liswps/631.pdf, The Relationship between Inequality and GDP Growth: an Empirical Approach, The Kuznets inverted-U hypothesis: panel data evidence from 96 countries, Inequality and growth: the neglected time dimension, New ways of looking at old issues: inequality and growth, Inequality and Growth: The Neglected Time Dimension, The simultaneous evolution of growth and inequality, Inequality and Economic Growth: The Perspective of the New Growth Theories, Inequality and economic growth: the perspective of the new growth theories, CEPREMAP Working Papers (Couverture Orange), Mark Pearson Growth, Inequality and Social Protection, Inequality, redistribution and growth: A challenge to the conventional political economy approach, Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations, RATS program to replicate Arellano-Bond 1991 dynamic panel, Estimating dynamic panel data models: a guide for macroeconomists. Not only will the Indian middle class become a driving force within the Indian economy, but its aggregate purchasing power will result in, The Indian economy has come a long way, with the country’s GDP crossing the $2 trillion mark in 2014. The magnitude of this effect is consistent across most studies: a one-standard-deviation decrease in inequality raises the annual growth rate of GDP per capita by 0.5 to 0.8 percentage points. Transmission mechanism in the negative influence of inequality on growth, b. When requesting a correction, please mention this item's handle: RePEc:lis:liswps:631. People Research on Indias Consumer Economy, ICE 360 (2016) Survey: Household Survey of Indian Consumer Economy and Consumer Environment, National Survey of Household Income and Expenditure (NSHIE), ICE 360 (2014) National Survey of Indian Consumers, Boosting rural employment in a globalised regime, Financial sector and economic growth; Consumer credit as a driver of economic growth in Algeria, The great Indian middle class: a force to reckon, The long journey towards inclusive growth. While it took us 60 years to hit the $1 trillion figure, we added the next trillion in. When the GDP growth rate decreases, the income inequality also decreases. For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Piotr Paradowski). The continued slowdown in the Indian economy has caused much concern among a broad swathe of players, including economists, policy-makers, the corporate sector and consumers. Accordingly, in the initial stages of economic Growth, the level of GDP per capita and inequality are positively correlated. The present work considers two samples of OCSE countries; in the full sample 33 countries are analyzed for the 1971-2010 period and inequality data are taken from the UNU-WIDER dataset. Since the late 1970s, gross domestic product has almost doubled, but most of the gains have gone to the wealthy. In income terms, even though the bulk of this growth has been driven by the rich households (top 20%), the bottom 40% has also enjoyed an 8%-plus CAGR between 2004-05 and 2013-14. Barro (2000 and 2008) claims that inequality has a positive effect on GDP growth in advanced economies, but has a negative impact in developing ones. On the other hand, if the income share of the poorest 20% of the population increases by 1 pp (a reduction in inequality), GDP growth is 0.38 pps higher during the next five years on average. The paper. 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