The growth, inequality and poverty triangle in South Africa: A provincial analysis

Since the conclusion of apartheid in 1994, South Africa has witnessed notable economic growth; however, poverty and income inequality continue to be widespread issues. Despite economic growth, poverty and income inequality remain prevalent, with millions of South Africans living below the poverty line and encountering substantial obstacles to economic opportunities. This research examines the connections among economic growth, poverty alleviation, and income inequality in South Africa, utilising data from 1993 to 2023. This study employs various econometric models, specifically Vector Error Correction (VECM), Autoregressive Distributed Lag (ARDL), and Generalised Method of Moments (GMM), to examine the relationships among economic growth, poverty reduction, and income inequality in South Africa. The findings indicate that economic growth has a positive effect on poverty reduction, while simultaneously exerting a negative influence on income inequality. The research indicates that employment and access to electricity are essential determinants in alleviating poverty and income inequality. This study recommends that policymakers prioritise investments in education, job training, and infrastructure development, especially in rural areas, to foster inclusive economic growth and mitigate poverty and income inequality. Policymakers should enact measures to enhance electricity access and foster employment opportunities within the formal sector.

Quantitative Aspects of the Economic Growth of Nations: VIII. Distribution of Income by Size

This study aims to determine the effect of the Human Development Index, Capital Expenditure, Fiscal Decentralization Against Economic Growth and Income Inequality in East Java in Indonesia. This study applied a quantitative approach using a combination between time series and data between place and space (cross-section), to determine whether there is a relationship between two variables or better direct or indirect influence. The findings indicated that the index of human development (HDI) and capital expenditure have a positive and significant impact on economic growth. The higher Human Development Index and capital expenditure affect the greater economic growth rate. However, the degree of fiscal decentralization does not influence economic growth, while economic growth has a positive effect and significant effect on income inequality. Inter-regional economic growth showed varies, in increasing per capita income in some areas of high economic growth, while some other regions have low economic growth, resulting in increased income inequality. Keywords: Human Development Index, Capital Expenditure, Fiscal Decentralization, Economic Growth JEL Codes: E62; O15; R11

This study aims to analyze: (1) The causality relationship between unemployment and the human development index, (2) The causal relationship between economic growth and the human development index, (3) The causal relationship between income inequality and the human development index, (4) The causal relationship between economic growth and unemployment, (5) Causality relationship between income inequality and unemployment, (6) Causality relationship between income inequality and economic growth, (7) Long-term and short-term relationship between human development index, unemployment, economic growth and income inequality in Indonesia. The data used is panel data from 34 provinces in Indonesia during the 2011-2020 period. The analytical method used is Panel Vector Error Correction Model (PVECM) and Panel Granger Causality Test. The results of this study indicate that there is a relationship: (1) Two-way causality between unemployment and the human development index, (2) Economic growth to the human development index, (3) Income inequality to the human development index, (4) Economic growth to unemployment, ( 5) Income inequality to unemployment, (6) Income inequality to economic growth, (7) There is a long-term relationship between unemployment and the human development index which has a positive effect, economic growth has a negative effect on the human development index and income inequality on the human development index has a positive effect negative.

We try to explain the simultaneous increases in economic growth and income inequality in China with a heterogeneous endogenous growth-based DSGE model. It is found that: First, our model can simulate the positive correlation between economic growth and income inequality in China. China’s economic development has created better conditions and incentives for the accumulation of human capital of workers with high initial human capital, thus stimulating them to contribute more to economic growth, but this widens the income inequality simultaneously. Second, the change in economic growth and the change in income inequality also exhibit a positive correlation under the influence of various policy shock. Any shock that raises economic growth, such as different types of technology shock and investment shock (after 8 quarters), will correspondingly widen income inequality. Conversely, any shock that reduces economic growth, such as fiscal spending shock, interest rate shock and investment shock (before 8 quarters) will correspondingly reduce income inequality. Third, the government’s preference for workers with high initial human capital in the implementation of macroeconomic policies determines the positive correlation between the change in economic growth and in income inequality. Workers with high initial human capital are central to the effectiveness of macroeconomic policies.

Income inequality refers to the disparity in income received by individuals or groups within a society, resulting in noticeable gaps. Several factors contributing to income inequality in a region include differences in economic growth, population size, and poverty levels. This study aims to analyze the direction and magnitude of the influence of factors affecting income inequality, namely the number of poor people, minimum wage, human development index, and open unemployment rate. The data used in this research is panel data from 2019 to 2023 in the Special Region of Yogyakarta. The analysis technique employed is panel data regression analysis using an econometric model (estimator). The chosen model in this study is the Random Effect Model (REM). The results indicate that income inequality in the Special Region of Yogyakarta during the 2019-2023 period is influenced by the variables of the number of poor people and the human development index. In contrast, minimum wage and open unemployment rate do not have an effect on income inequality in the region during the same period.

Income inequality remains a pressing social and economic issue in East Asia, despite rapid economic growth and significant improvements in human development. Countries such as China, Japan, and South Korea have experienced divergent patterns of inequality due to variations in social policies, labor market structures, and the distribution of economic growth. While prior studies have examined the relationship between economic growth, human development, and income inequality, there is limited consensus regarding the relative influence of human development versus economic expansion, particularly in the context of East Asia. This research addresses this gap by investigating the impact of the Human Development Index (HDI) and economic growth on income inequality across three East Asian countries from 2003 to 2022. A quantitative panel data approach was employed, using balanced data from 60 observations over 20 years. The study applied the Fixed Effect Model (FEM) with cross-sectional dummy variables to account for country-specific heterogeneity. Descriptive statistics, panel regression diagnostics, and robustness tests were conducted to ensure model validity. The results indicate that HDI has a significant negative effect on income inequality, suggesting that improvements in education, healthcare, and living standards contribute to more equitable income distribution. In contrast, economic growth shows a positive but statistically insignificant effect, implying that growth benefits are unevenly distributed and may not substantially reduce inequality. Among the countries studied, China exhibits the highest individual effect on income inequality, followed by Japan and South Korea. These findings underscore the crucial role of human development in reducing income disparities. Policy implications include prioritizing investments in education, healthcare, and social safety nets, alongside the implementation of inclusive growth strategies to ensure equitable economic benefits. Future research should expand the analysis to other regions and explore sectoral and micro-level mechanisms linking human development to income inequality.

This article attempts to examine the relationship between economic growth and poverty reduction through an analysis of the effects of remarkable growth performance of three East Asian countries viz China, Korea and Taiwan on poverty reduction. Through an extensive review of literature, it was found that the level of poverty as well as income inequality in China has remained high for most of the time despite exceptional growth rates over the past few decades. Whereas, both South Korea and Taiwan have witnessed significant reduction in the level of poverty as well as income inequality. The findings suggest that a robust relationship between growth and poverty reduction does not prevail across all the ‘miraculous economies’. Furthermore, the findings also shed light on the nexus between economic growth, poverty reduction and income inequality. From the Chinese case, it is evident that economic growth has not translated into poverty reduction. Skewed economic growth patterns seem to have deteriorated income inequality among different regions in China. On the contrary, economic growth seems to be closely associated with both poverty reduction and income inequality both in the Republic of Korea and Taiwan.

Globally increasing income disparity, both across and within countries, suggests attention be paid to the role of fiscal policy in mitigating the problem. However, conventional wisdom suggests this can be achieved only at the cost of economic efficiency. This suggests fiscal policy has two incompatible major, long-term targets: economic growth and income equality. Thus economic growth, income inequality and fiscal policy variables are neither independent nor separately determinable. The implication is that it is essential to determine empirically the impact of fiscal policy on economic growth and income inequality and to do so in a way that allows for their interdependence. Consequently a conceptual framework is developed in which economic growth, income inequality and fiscal policy are interdependently determined. Within this framework, and based on a large body of empirical research, a system of simultaneous equations (SSEs) is constructed, with each endogenous variable treated as a function of the other endogenous variables, and also as a set of controlled variables taken from the theoretical and empirical literature. The following six hypotheses are developed from the literature in such a way that they can be parameterized and tested as individual system coefficients of the SSEs. The first hypothesis is that redistributive government expenditures involve a trade-off between economic growth (efficiency) and income equality (equity). The second hypothesis is that direct taxation receipts reduce income inequality, while indirect taxation receipts and non-redistributive expenditures increase income inequality. Within hypothesis 3, redistributive government expenditures are assumed to largely reduce income inequality when they are financed by direct taxes rather than by debt. Hypothesis 4 posits that non-redistributive expenditures reduce economic growth when they are financed by direct taxes rather than by debt. Outside the policy arena, hypothesis 5 is that income inequality reduces economic growth, while hypothesis 6 is that economic growth reduces income inequality. The SSEs are then specified as an empirically measurable simultaneous equations model (SEM), taking country- and time-specific unobservable factors into account. The SEM is estimated using the three-stage least-squares method (3SLS) to test the validity of the hypotheses using the three-year averages of data for 1995–2015 for a balance panel of 19 high-income OECD countries. A reduced-form version using a structural vector autoregressive (SVAR) model and a structural vector error correction (SVEC) model is also estimated using country-specific annual time series data from Australia and Sri Lanka for 1965–2014 and 1981–2013 respectively. A small SVAR model for an open economy is constructed for contemporaneous identification. Based on evidence of one cointegrating vector among the variables, a SVEC model is specified for the long run and is estimated to examine the impact of three permanent fiscal shocks (i.e. direct and indirect taxation receipts and government expenditure) on aggregate output and income inequality. Estimation of the SEM provides statistically significance evidence for all except the first and fifth hypotheses. An increase in redistributive expenditures reduces income inequality but is without a statistically significant impact on economic growth. The total net effect of direct taxation receipts, indirect taxation receipts and non-redistributive expenditures on income inequality is positive: increases inequality. Financing non-redistributive expenditures by debt is less harmful for economic growth than financing them by direct taxes, while lowering non-redistributive expenditures increases economic growth and decreases income inequality. The Australian SVEC model shows that an increase in direct taxation receipts permanently reduces per capita real GDP but has no statistically significant impact on income inequality. Conversely, an increase in deficit-financed government expenditures does not affect per capita real GDP but permanently reduces income inequality. An increase in indirect taxation receipts permanently increases income inequality, while the adverse effect of indirect taxation receipts on income inequality is greater than the redistributive effect of government expenditure. The Sri Lankan SVEC model shows that an increase in deficit-financed government expenditures permanently reduces both income inequality and per capita real GDP. An increase in indirect taxation receipts permanently increases income inequality. However, indirect taxation receipts have a statistically significant positive impact on long-run per capita real GDP. From these results a range of fiscal policy implications are drawn. For the SEM model this includes increasing redistributive expenditures financed by direct taxes to reduce income inequality, while cutting non-redistributive expenditures to help achieve both efficiency and equity objectives. The SVEC models imply that Australian fiscal policy did little to either influence the efficiency–equity trade-off or ameliorate its effects in the long run, while for Sri Lanka continued reliance on indirect taxes exacerbates equity problems.

Income and Non-Income Inequality in Post-Apartheid South Africa: What are the Drivers and Possible Policy Interventions?

Income and Non-Income Inequality in Post-Apartheid South Africa: What are the Drivers and Possible Policy Interventions?

Institutional Quality and Income Distribution

The long run trade orientation of an economy is measured in this article by an index which measures the extent to which the real exchange rate is distorted away from its free trade level by the trade regime. The technique for estimating a cross country index of real exchange rate distortion uses the international comparison of prices prepared by Robert Summers and Alan Heston. Resource endowment constitutes the norm and real overvaluation or undervaluation relative to this norm reveals whether incentives are directed to the domestic or international market. The index is constructed based on data for GDP/capita average price level in US dollars 1976-85 and GDP growth rate/capita 1976-85. Other sections are devoted the comparison of the procedure for 117 countries between 1976-85 and an examination of the empirical relationship between outward orientation and economic growth and sensitivity analysis. The results indicate that Latin America generally was overvalued by 33% relative to Asia and Africa was overvalued by 86%. The real exchange rate distortion index supports the view that Asian countries are more outward oriented. Asian economies have lower price levels which reflect relatively modest protection and incentives oriented to external markets. Latin American countries with moderately high price level and African countries with very high price levels reflect strong protection and incentives directed to production for the domestic market. An alternative specification which eliminates the dummy variables for Africa yields similar results with slightly lower magnitude; i.e. overvaluation is 60% instead of 86% for Africa and Latin America is overvalued by 39% instead of 33% over Asia. A table is provided which indicates by country the distortion and variability of the real exchange rate the GDP growth the 1976 GDP/capita and the investment rate. Another finding was that there is a significant negative relationship between distortion of the real exchange rate and growth of GDP/capita after controlling for the effects of real exchange rate variability and investment level with both the original specification and the alternative. The growth rate/capita of Latin American and African countries would increase 1.5-2.1% with a shift to move outward oriented trade policies. This gain as well as devaluation of the real exchange reate trade liberalization and maintenance of a stable real exchange rate would contribute to positive growth rates. In the analysis of the poorest 24 countries the result was that only rate distortion and not variability and investment rate explained the growth rate. The gain for Ghana for example of adopting the trade policies and exchange rate of Bangladesh would be 5% to its growth.

背景：經濟成長和所得不平等對人口健康的影響，已被許多研究所驗證，然而隨著二十世紀末經濟全球化的加速，世界各國經濟發展形成顯著的改變，因此有必要進一步檢視經濟成長、所得不平等和人口健康的關係。再者，過去的研究將經濟成長和所得不平等視為兩個獨立的變項，並未考量兩者之間的關係來檢證其對人口健康的影響。 目的：（1）探討1980-2000年經濟成長、所得不平等和人口健康的關係，並指出在高、低所得國家中，經濟成長、所得不平等對人口健康的差異；（2）結合經濟成長和所得不平等形成經濟發展型態的分類，探討1980-2000年不同經濟發展型態國家，人口健康變化的差異，以及經濟發展型態對人口健康改善的影響。 方法：本研究為一跨國區位研究，資料來源為世界發展指標（World Development Indicators 2006）以及世界所得不平等資料庫（World Income Inequality Database），採用1980、1990和2000年的資料。主要的分析涵括了全球77個國家，包括已開發和發展中國家。經濟成長指標選用GDP和GNI的年均成長率，所得分配指標選用吉尼指數，人口健康指標則選用平均餘命、嬰兒死亡率、五歲以下死亡率。第一部份透過迴歸分析檢視經濟成長、所得不平等對人口健康影響，以及在低、高所得國家的差異；第二部分檢視不同經濟發展類型對人口健康的影響。透過年均經濟成長率（大於5%、0%至5%、小於0%）、吉尼指數變化率（大於0%、小於0%），將各國經濟發展型態進行分類為六類：快速成長－所得分配改善（A組，4國）、快速成長－所得分配惡化（B組，6國）、穩定成長－所得分配改善（C組，16國）、穩定成長－所得分配惡化（D組，34國）、經濟衰退－所得分配改善（E組，6國）、經濟衰退－所得分配惡化（F組，11國）。 結果：（1）經濟成長和所得不平等都與平均餘命、嬰兒死亡率以及五歲以下死亡率有顯著的相關：較高LnGDP（LnGNI）和較低的吉尼指數，則平均餘命愈高、嬰兒和五歲以下死亡率愈低。無論是平均餘命、嬰兒死亡率或五歲以下死亡率，吉尼指數的相對影響力在高所得國家較大。在平均餘命的迴歸模型中，吉尼指數和LnGDP（LnGNI）的標準化迴歸係數比值，高所得國家為–0.52（-0.79），低所得國家則為–0.45（-0.48）。在嬰兒死亡率迴歸模型中，高所得國家比值為 –0.61（-0.99），低所得國家為–0.23（-0.25）。從五歲以下死亡率的迴歸模型來看，高、低所得國家的比值則分別為–0.70（-1.40）以及–0.25（-0.27）。（2）經濟衰退國家的人口健康改善較差，特別是當中所得不平等惡化者。1980-2000年間，各組平均零歲平均餘命變化分別為9.31%（A組）、10.45%（B組）、7.43%（C組）、7.39%（D組）)、3.90%（E組）以及–6.18%（F組）；各組平均嬰兒死亡率變化分別為–58.6%（A組）、-47.0%（B組）、-43.0%（C組）、-54.3%（D組）、-30.1% (E組)以及–13.4% （F組）；各組平均五歲以下死亡率變化分別為–58.6%（A組）、-47.0%（B組）、-43.0%（C組）、-54.3%（D組）、-30.1%（E組）以及–13.4%（F組）。多元迴歸分析顯示，在控制了所得、所得不平等、教育和健康支出等指標後，經濟衰退－所得分配惡化對平均餘命、嬰兒死亡率、五歲以下死亡率的改善仍有顯著的負面影響（p<0.05）。 結論：經濟成長和所得不平等對人口健康皆有顯著影響，其中所得不平等對高所得國家的影響比低所得國家來得重要。經濟衰退對人口健康會造成威脅，然而所得分配的改善對經濟衰退國家的人口健康有保護的效果。

This study aims to analyze (1) the effect of regional fiscal autonomy degrees, tax and investment ratios on economic growth in Indonesia, (2) the effect of economic growth, labor productivity, investment and the Human Development Index (HDI) on income inequality in Java.The type of research is descriptive and associative research. The type of data is documentary data, the data source is panel data during 2013 - 2017 in six provinces in Java. This study uses simultaneous equation modeling tools with the Indirect Least Squared method ( ILS) Common Effect. Endogenous variables in the study are economic growth and income inequality. While the exogenous variables are regional fiscal autonomy, tax ratios, labor productivity, investment and the Human Development Index (HDI).The results of the study concluded that (1) the variables of regional fiscal autonomy, tax and investment ratios had a significant effect on economic growth in Java.. (2) Variable economic growth, labor productivity, investment and HDI significantly affect income inequality in Java. The policies that can be suggested are that efforts are needed to increase economic growth with the efforts of the central government together with regional governments to increase Regional Original Revenue (PAD) by optimizing regional potentials. Increasing the potential of this area will encourage the increase of PAD in each region will have an impact on the increasing degree of regional fiscal autonomy (ratio between PAD and Total Regional Revenue). Focus more on equity-oriented development not only on economic growth. Keywords: economic growth, income inequality