Impact of Income Inequality on Economic Growth – Evidence from the Ten (10) Biggest Economies in Africa

Abstract

Contributing to existing literature on the relationship between inequality and economic growth, this paper focused on the top ten biggest economies in Africa. There was positive correlation between income inequality and economic growth in the long term. Mean School Year and Gross Savings also regressed positively because it was established that a 1% increase in the number of years spent in school within these countries will causes the economy to grow about 214.76%, and 1% increase in gross savings pushes economic growth by 3.61% annually. Expectedly, unemployment had negative relationship with economic growth. A 1% decrease in unemployment rate within these countries will boost long term economic growth by 7.72%. Due to low educational standard, inadequate technological advancement, high unemployment rate and low human capital, gross capital formation had inverse relationship with economic growth in these countries. The paper recommended that Governments in these countries adopt strategies and approaches such as increase public spending and create employment opportunities, adopt new educational policy to increase the average school years with accompanying improvement in its quality.

Keywords: Economic growth, Income Inequality, African Countries, Gini Coefficient, Unemployment

DOI: 10.7176/JESD/10-14-07

Publication date:July 31^st 2020