Assessing the Impact of Income Inequality on the Growth of National Economies: Bayesian Approach

Abstract

The article assesses the relationship between income inequality and economic growth rates. We believe that such an assessment will help to define the prerequisites and conditions for the transition of economic growth rates into qualitative determinants. In the study we consider the net national income as an indicator of economic growth. The novelty of the study is in the use of the Bayesian approach in order to assess the interdependence of inequality in countries with different income levels and their economic growth rates. The assessment tool is the original Bayesian econometric model with variation of probable determinants. In the context of the study, the Bayesian approach reflects the interaction between the growth rates of net national income and inequality indicators for different income groups of countries in accordance with the World Bank classification. Empirical analysis of 164 countries data show a positive relation for low-income countries