Income Inequality and Economic Growth Nexus in Ethiopia: A Critical Review

Abstract

The relationship between income inequality and economic growth is not well established in the growing literature. To contribute towards filling this information gap, this paper reviews the relationship between income inequality and economic growth in Ethiopia. Grey literature including journal articles, conference proceedings, working papers, dissertations, reports, and books from internationally recognized institutions were used for the review. Literature indicates that, there were similarities in the trends of the Gini coefficient and real GDP in Ethiopia. The growth-inequality nexus remains paradoxical. Income inequality has been widely presented as having a negative relationship with economic growth in this country, while a positive relationship has also been demonstrated. However, given the country's current geopolitical and institutional environments, the government should prioritize addressing income inequality and making economic growth more inclusive and sustainable in the short run. For the long-term growth of the Ethiopian economy, all economic actors should get equal opportunities based on their efforts in economic activities.

Keywords: Inequality-growth, Income inequality, Economic growth, Ethiopia.

DOI: 10.7176/JESD/14-1-03

Publication date: January 31^st 2023