An Empirical study on the relationship between Poverty, Inequality and Economic Growth in Nigeria

Abstract

The paper used bound testing approach to cointegration and Granger causality test to determine the relationship between poverty, inequality and economic growth in Nigeria. A secondary time series data were used in the study from 2000 to 2012. In examining the causal relation among the variables, the result shows that there is a unidirectional causal relationship running from RGDP to poverty, which means that an increase in GDP in Nigeria causes high level of poverty. In addition, the result revealed that the RGDP Granger causes the literacy level without a feedback.  The result further infers that the bidirectional causal relationship existed between literacy and poverty. The paper also indicated that population growth Granger causes literacy without feedback while unidirectional causality exists between poverty and population. The policy implication is that demand management policies aim at reducing the gap between rich and poor should be vigorously pursued in order to minimise the rate of lingering inequality in the country and spur institutional change that will bring about betterment of people in the country. More so, concerted effort is needed to strengthen small and medium enterprises through tax holiday, access to finance and temporal protection so that more employment would be generated which in turn will reduce poverty and inequality.

Keywords: Economic growth, Inequality, Poverty, Literacy rate, Unemployment.

JEL Classification Codes: O16, O47, C32