Obstacle to Economic Growth and Development: Income Inequality and the Middle Income Trap Relationship

Yüksel Çağdaş
Additional contact information
Yüksel Çağdaş: Bolu Abant İzzet Baysal University

Journal of Finance Letters (Maliye ve Finans Yazıları), 2025, vol. 40, issue 124, 291-315

Abstract: This study analyzes the relationship between income inequality and the Middle-Income Trap using a panel dataset covering 50 countries for the period 2000–2023. Unlike most studies in the literature that primarily focus on the growth–inequality nexus, this research places the Middle-Income Trap at the center and employs three different statistical methods. First, Pearson, Spearman, and Kendall correlation coefficients are applied to examine the relationships among the variables. Second, a panel regression analysis is conducted to test the impact of income inequality on per capita income. Finally, the Dumitrescu–Hurlin panel causality test is employed to identify the direction of the relationship. The findings reveal a strong and bidirectional causality between income inequality and economic growth and development. By highlighting the significance of inclusive growth policies and structural reforms aimed at reducing inequality in the process of overcoming the Middle-Income Trap, the study provides a novel and methodologically robust contribution to the literature.

Keywords: Income Inequality; Middle Income Trap; Economic Growth and Development; Correlation Analysis; Panel Data Analysis (search for similar items in EconPapers)
JEL-codes: D3 I3 O10 O4 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://dergipark.org.tr/tr/download/article-file/4682465 (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:acc:malfin:v:40:y:2025:i:124:p:291-315

DOI: 10.33203/mfy.1655958

Access Statistics for this article

Journal of Finance Letters (Maliye ve Finans Yazıları) is currently edited by Süleyman Kale

More articles in Journal of Finance Letters (Maliye ve Finans Yazıları) from Maliye ve Finans Yazıları Yayıncılık Ltd. Şti.
Bibliographic data for series maintained by Süleyman Kale ().