Question

Income inequality impact on economic growth of south africa

Answer 1

Answer:

Yet, economic disparities have worsened. On the basis of per capita expenditure, data suggests that the country experienced a rise in income inequality, with its Gini coefficient increasing from 0.64 in 1995 to 0.69 in 2005. Viewed broadly, South Africa may be the most consistently unequal country in the world.

Explanation:

There is mixed evidence in the literature regarding the relationship between income inequality and economic growth. Some studies have found a positive relationship, others a negative relationship while some found no correlation between the two variables. This study is an empirical analysis of economic growth and income inequality in Nigeria. Its purpose is to observe the impact of income inequality on economic growth in Nigeria, examine whether Kuznets curve holds and suggest probable and effective policy measures based on the findings to help reduce the gap between the rich and the poor. Data was obtained from secondary sources namely, World Bank archives, National Bureau of Statistics and a statistical website called KNOEMA, using the appropriate instruments. In order to determine the shape of the Kuznets curve, a quadratic function was estimated, and the results confirm that the Kuznets inverted-U curve does not hold for Nigeria. The granger causality test was also conducted to determine the direction of the relationship between income inequality and economic growth. The results indicate that GDP granger causes income inequality in Nigeria. Finally, a multiple regression analysis was employed to estimate the relationship between the Gini coefficient, GDP and other explanatory variables. The results suggest the GDP, CPI, population growth and education are all true determinants of income inequality in Nigeria. The findings from the research indicates that as economic growth increases, the level of income inequality actually worsens in Nigeria. The government is advised based on the results from the study to employ measures that would not only boost economic growth but also reduce the margin between the poor and the rich and ensure an equitable distribution of resources in the future.

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