Effects of Income Inequality on Economic Growth: The Case of the Republic of Moldova

Rodica Pisica ()
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Rodica Pisica: Academy of Economic Studies of Moldova

Ovidius University Annals, Economic Sciences Series, 2022, vol. XXII, issue 1, 407-416

Abstract: As the interdependence between the economic inequality and growth is not straightforward and rather ambiguous, in this article we are testing two hypotheses: the economic growth could be affected by inequality in income distribution and the income inequality is likely to have a negative effect on the economic growth of Moldova. Even though we admit a potential influence of other variables, we conclude that the first hypothesis is true as the econometric measurements have shown a moderate to strong effect of income inequality indicators on the growth variable. At the same time, the analyzed data have shown that with the decrease of inequality, an increasing trend in economic growth is noted. Concurrently, when the inequality expressed by the ratio between the incomes of the population in quintiles I and V increases, we observe a decrease in GDP (PPP) and therefore an economic decline in Moldova, thus proving the second hypothesis.

Keywords: economic growth; income inequality; distribution; econometric measurement; income gap. (search for similar items in EconPapers)
JEL-codes: D31 D63 E25 O40 O47 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ovi:oviste:v:xxii:y:2022:i:1:p:407-416

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