Economic Growth and Income Inequality in Ethiopia

Abstract

The main objective of the study is to investigate the relationship between economic growth and income inequality in Ethiopia during the period 1980-2014. The linear regression model is applied in order to investigate the long-run and short run relationship between the dependent variable (real GDP) and included explanatory variable. The finding shows that there is a stable long run relationship between real GDP and included variables. And the empirical results reveal that income inequality measured by gini coefficient is found to have negative impact on economic growth. The study has also an important policy implication which implies that economic growth can be improved significantly when the income inequality among people reduced through different redistributive mechanisms.

Keywords: - Economic growth, Income Inequality, Gini coefficient, Ethiopia

DOI: 10.7176/JESD/13-11-04

Publication date:June 30^th 2022