Volume2,December 2017,

Topic : Comparative study of relationship between income inequality and economic growth in China with India.

Authors:Liu Li || Charuk Singhapreecha, Jirakom Sirisrisakulchai

Abstract:This paper applies the Engle-Granger two-step ECM approach to estimate the long-term and short-term relationships between inequality and economic growth for China and India. Our estimation results support the S-shaped curve hypothesis relating GDP per capita to inequality with different starting points for the two countries. We find a positive causal relationship between China, showing that increased income inequality spurred economic growth. Furthermore, we find the same results that the trade openness increased inequality in China and India. As for redistribution, fiscal redistributive measures show a negative effect on China and India. In the inequality-GDP per capita relationship, export shows a negative effect in China and had no significant effect in India..

Keywords: Income inequality, Economic growth, Redistribution, S-shaped curve

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