Measuring the impact of per capita income and average years of schooling on income inequality: A panel data analysis

Abstract

Introduction

At the crest of the age of globalization are tainted by several economic crises, which undoubtedly have implications for income inequality. Therefore, it might be possible to find a link between income inequality, human capital and per capita income.

In this regard, the relationship between income inequality and per capita income are highly discussed area in economics since 1950s. In this regard, Kuznets (1955) curve provides theoretical basement to contrast the dynamic relationship between income inequality and per capital income paradox. Some of the existing literature detected negative relationship between income inequality and growth which depends on exogenous factors such as human capital (Fuente, 1997). In contrast Frorbes (2010) identified positive relationship and Corak (2013) found no relationship between those variables. Therefore, there is no consensus among the researcher regarding the relationship between income inequalities, human capital and economic growth.

However, most of the above research uses panel data only for the less time period (10 to 20 years). With this research gap, in this study we uses 40 years observation for 140 countries to analyze the relationship between income inequalities, human capital and economic growth.