International Journal of Engineering Research in Electronics and Communication Engineering

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

Author : Liu Li ¹ Charuk Singhapreecha ² Jirakom Sirisrisakulchai ³

Date of Publication :13th December 2017

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 for 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 in China and India. In the inequality-GDP per capita relationship, export show a negative effect in China and had no significant effect in India

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