Income Inequality, Poverty and Growth

Abstract

Today, one of the most important causes of global income inequality and poverty is the unequal sharing of the increase in economic growth between countries and regions. The increase in income inequality creates an important obstacle to economic development as it reduces the share of the poor in economic growth. Therefore, reducing poverty and income inequality is a fundamental policy goal in the development process. Because in the process of poverty alleviation, providing a fair income distribution as well as growth is important in terms of obtaining more effective results. For this reason, the aim of the study is to analyze the direction of global income inequality and its change by using the nonparametric conditional density estimation method. The analysis provides evidence to support that global income inequality did not decrease between 1995 and 2017. This result indicates that the gap is widening between countries with more even distribution and countries with an unfair distribution of income. Besides, the other aim of this study is to investigate the relationship between income inequality, poverty and economic growth. In this context, countries are classified according to income groups and analyzed with cross-section data estimation method. The general findings of the study vary in income groups in accordance with the theoretical literature. According to the results for all income groups, economic growth decreases poverty and income inequality increases poverty. On the other hand, results show that while increasing income inequality in the middle-income group increases growth, in the high-income group the increase in growth decreases inequality.