Unveiling the Relationship between Economic Growth and Equality for Developing Countries

Tsun Se Cheong, Guanghua Wan and David Kam Hung Chui

China & World Economy, 2022, vol. 30, issue 5, 1-28

Abstract: This study investigates the relationship between economic growth and inequality by employing the artificial neural network approach. There are many important findings. First, this work reveals the underlying functional form of economic growth and inequality by using three‐dimensional diagrams. Second, the findings show that there was an inverted‐U relationship between economic growth and inequality. This explains apparent contradictions in research findings in the literature. Third, the optimal level of inequality, which corresponds to the highest level of economic growth, is computed for different economies. Our findings were confirmed by the development processes in many developing countries and also in China in recent years, thereby highlighting the importance of inequality alleviation in promoting further economic growth. These findings enable us to derive pragmatic policy implications for other developing countries at different stages of economic development in achieving sustainable growth with equity.

Date: 2022
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