Date of Graduation

5-2023

Document Type

Thesis

Degree Name

Bachelor of Science in Business Administration

Degree Level

Undergraduate

Department

Economics

Advisor/Mentor

Farmer, Amy

Abstract

Income inequality and its relationship with economic growth has been a subject of debate in academia for decades. This paper examines the relationship the Gini index of five selected countries and four macroeconomic variables (GDP growth, unemployment rate, lending interest rate, and savings rate) for each country with two developed nations being represented (United States and Italy) and three developing nations being represented (Peru, Belarus, and Indonesia). After reviewing the literature on the relationship between income inequality and economic growth, a multivariate regression analysis of each country is presented; first with GDP growth as the dependent variable, followed by a second exercise using the Gini index as the dependent variable. In the first exercise, the Gini index was not a statistically significant variable for any of the selected countries in relation to GDP growth. In the second exercise, the selected macroeconomic variables in use changed depending on the significance level of the variables in a particular country from an initial regression. Overall, in the second exercise, the significant variables for each country can explain 73% of the variance in the Gini index for the United States, 65% of the variance in the Gini index for Italy, 84% of the variance in the Gini index for Peru, 80% of the variance in the Gini index in Belarus, and 63% of the variance in the Gini index in Indonesia.

Keywords

Income inequality; Economic growth; Macroeconomics

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