Determining the Relationship between Income Inequality, Economic Growth & Inflation

Danish Khattak, Ayaz Muhammad and Kashif Iqbal

Journal of Social Economics, 2014, vol. 1, issue 3, 104-114

Abstract: The objective of the study is to determine the relationship between economic growth, income distribution, and inflation and to test the existence of Kuznets Hypothesis in Pakistan. For this purpose, data on economic growth, income distribution and inflation have been collected from WDI for 22 years, i.e., from 1980 to 2002. Johnson’s Co-integration model has been used to analyze data. Empirical results proposed that income inequality has a long-term co-integrated movement with economic growth. In addition, economic growth hinders with the high income inequality. Furthermore, the empirical results show that there exists a log run relationship between inflation and income distribution. Another finding is that Kuznets hypothesis exists in Pakistan, despite the fact that inequality is affected positively by inflation. The government should control inflation to trim down income inequality. Government must revise tax policy, because indirect taxes cause high inflation due to which income distribution become unfair. Direct taxes should be employed in the in those people who have larger income.

Keywords: Economic growth; Income distribution; Kuznets Hypothesis; Inflation (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://rassweb.org/admin/pages/ResearchPapers/Paper%202_1495869520.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rss:jnljse:v1i3p2

Access Statistics for this article

More articles in Journal of Social Economics from Research Academy of Social Sciences
Bibliographic data for series maintained by Danish Khalil ().