Income inequality and economic growth: An empirical investigation in South Africa

Mdingi, Kholeka and Ho, Sin-Yu (2023): Income inequality and economic growth: An empirical investigation in South Africa.

Abstract

This study examines the relationship between income inequality and economic growth in South Africa for the period 1989 to 2018. The study is motivated by the high disparity in income inequality and stagnant economic growth that South Africa is experiencing. Using the autoregressive distributed lag (ARDL) bounds testing technique, we established a long-run relationship between economic growth and income inequality. The results revealed that income inequality has a negative impact on economic growth in the long run, and no effect in the short run. These results are robust with an estimation of the ARDL procedure that considers structural breaks. Therefore, policymakers should employ strategies that entail a double effect of growth in national income and consider the distribution of income in the long run. These policies include human capital accumulation, easily accessible education, and reduction in labour market dualism.

• Item Type: MPRA Paper
• Language: English
• Keywords: Income inequality, economic growth, ARDL bounds test, South Africa
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources ; Human Development ; Income Distribution ; Migration

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