IDEAS home Printed from https://ideas.repec.org/a/ejn/ejefjr/v6y2018i2p8-20.html
   My bibliography  Save this article

Is There Causality Relationship Between Economic Growth And Income Inequality?: Panel Data Evidence From Indonesia

Author

Listed:
  • Khairul Amri

    (Syiah Kuala University&State Islamic University Ar-Raniry, Indonesia)

  • Nazamuddin

    (Syiah Kuala University, Indonesia)

Abstract

Our study aims to determine the causality relationship between economic growth and income inequality. Using panel data set of 26 provinces from Indonesia for a period of 2005 to 2015, Pedroni's co-integration test, Panel Vector Error Correction Model, and Granger Causality Test were employed to analyze the relationship between the variables. Accordingly, the first main finding of the research is that there is a negative and significant relationship between the economic growth and income inequality in the long-run. Secondly, in the short run, the economic growth is positively and insignificantly related to income inequality. In addition, there is a unidirectional causality running from income inequality to economic growth.

Suggested Citation

  • Khairul Amri & Nazamuddin, 2018. "Is There Causality Relationship Between Economic Growth And Income Inequality?: Panel Data Evidence From Indonesia," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 6(2), pages 8-20.
    • Handle: RePEc:ejn:ejefjr:v:6:y:2018:i:2:p:8-20
    as

    Download full text from publisher

    File URL: https://eurasianpublications.com/wp-content/uploads/2021/02/EJEF-6.2.2.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Pede, Valerien O. & Florax, Raymond J.G.M. & Partridge, Mark D., 2009. "Employment Growth and Income Inequality: Accounting for Spatial and Sectoral Differences," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49460, Agricultural and Applied Economics Association.
    2. Mattias Lundberg & Lyn Squire, 2003. "The simultaneous evolution of growth and inequality," Economic Journal, Royal Economic Society, vol. 113(487), pages 326-344, April.
    3. Shin, Inyong, 2012. "Income inequality and economic growth," Economic Modelling, Elsevier, vol. 29(5), pages 2049-2057.
    4. Muinelo-Gallo, Leonel & Roca-Sagalés, Oriol, 2013. "Joint determinants of fiscal policy, income inequality and economic growth," Economic Modelling, Elsevier, vol. 30(C), pages 814-824.
    5. Meltem Ucal & Alfred Albert Haug & Mehmet Hüseyin Bilgin, 2016. "Income inequality and FDI: evidence with Turkish data," Applied Economics, Taylor & Francis Journals, vol. 48(11), pages 1030-1045, March.
    6. Pedroni, Peter, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-670, Special I.
    7. Neves, Pedro Cunha & Afonso, Óscar & Silva, Sandra Tavares, 2016. "A Meta-Analytic Reassessment of the Effects of Inequality on Growth," World Development, Elsevier, vol. 78(C), pages 386-400.
    8. Majid Sameti & Leila Rafie, 2010. "Interaction of Income Distribution, Taxes and Economic Growth (The Case of Iran and Some Selected East Asian Countries)," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 15(1), pages 67-81, winter.
    9. Li, Tingting & Lai, Jennifer T. & Wang, Yong & Zhao, Dingtao, 2016. "Long-run relationship between inequality and growth in post-reform China: New evidence from dynamic panel model," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 238-252.
    10. Yang, Yiwen & Greaney, Theresa M., 2017. "Economic growth and income inequality in the Asia-Pacific region: A comparative study of China, Japan, South Korea, and the United States," Journal of Asian Economics, Elsevier, vol. 48(C), pages 6-22.
    11. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jun Zhao & Xiucheng Dong & Kangyin Dong, 2021. "Can agglomeration of producer services reduce urban–rural income inequality? The case of China," Australian Economic Papers, Wiley Blackwell, vol. 60(4), pages 736-762, December.
    2. Paulina Permatasari & Assyifa Szami Ilman & Carol Ann Tilt & Dian Lestari & Saiful Islam & Rita Helbra Tenrini & Arif Budi Rahman & Agunan Paulus Samosir & Irwanda Wisnu Wardhana, 2021. "The Village Fund Program in Indonesia: Measuring the Effectiveness and Alignment to Sustainable Development Goals," Sustainability, MDPI, vol. 13(21), pages 1-30, November.
    3. Tsun Se Cheong & Guanghua Wan & David Kam Hung Chui, 2022. "Unveiling the Relationship between Economic Growth and Equality for Developing Countries," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(5), pages 1-28, September.
    4. Hakim, Dani Rahman & Rosini, Iin, 2022. "Regional Income Inequality in Indonesia: The Role of Public and Private Investment," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 56(3), pages 87-101.
    5. Nasfi Fkili Wahiba & Mahmoudi Dina, 2023. "Technological Change, Growth and Income Inequality," International Journal of Economics and Financial Issues, Econjournals, vol. 13(1), pages 121-131, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Seyi Saint Akadiri & Ada Chigozie Akadiri, 2018. "Growth and Inequality in Africa: Reconsideration," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 4(3), pages 76-86, September.
    2. Yang, Yiwen & Greaney, Theresa M., 2017. "Economic growth and income inequality in the Asia-Pacific region: A comparative study of China, Japan, South Korea, and the United States," Journal of Asian Economics, Elsevier, vol. 48(C), pages 6-22.
    3. Dierk Herzer & Sebastian Vollmer, 2012. "Inequality and growth: evidence from panel cointegration," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 10(4), pages 489-503, December.
    4. Duc Hong Vo & Thang Cong Nguyen & Ngoc Phu Tran & Anh The Vo, 2019. "What Factors Affect Income Inequality and Economic Growth in Middle-Income Countries?," JRFM, MDPI, vol. 12(1), pages 1-12, March.
    5. José Carlos Coelho & José Alves, 2021. "Two-way relationship between inequality and growth within fiscal policy channel: an empirical assessment for European countries," Working Papers REM 2021/0205, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    6. Ranjan Aneja & Umer J. Banday & Tanzeem Hasnat & Mustafa Koçoglu, 2017. "Renewable and Non-renewable Energy Consumption and Economic Growth: Empirical Evidence from Panel Error Correction Model," Jindal Journal of Business Research, , vol. 6(1), pages 76-85, June.
    7. Neil A. Wilmot & Ariuna Taivan, 2021. "Examining the Impact of Financial Development on Energy Production in Emerging Economies," JRFM, MDPI, vol. 14(2), pages 1-17, February.
    8. José Abraham López Machuca & Jorge Eduardo Mendoza Cota, 2017. "Salarios, desempleo y productividad laboral en la industria manufacturera mexicana. (Wage, Unemployment and Labor Productivity in the Mexican Manufacturing Industry)," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 185-228, October.
    9. Bernstein, Ronald & Madlener, Reinhard, 2011. "Responsiveness of Residential Electricity Demand in OECD Countries: A Panel Cointegation and Causality Analysis," FCN Working Papers 8/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    10. Hosan, Shahadat & Rahman, Md Matiar & Karmaker, Shamal Chandra & Saha, Bidyut Baran, 2023. "Energy subsidies and energy technology innovation: Policies for polygeneration systems diffusion," Energy, Elsevier, vol. 267(C).
    11. Valérie Mignon & Christophe Hurlin, 2007. "Une synthèse des tests de cointégration sur données de panel," Économie et Prévision, Programme National Persée, vol. 180(4), pages 241-265.
    12. Tang, Kin-Boon, 2011. "The precise form of uncovered interest parity: A heterogeneous panel application in ASEAN-5 countries," Economic Modelling, Elsevier, vol. 28(1-2), pages 568-573, January.
    13. George Halkos & Iacovos Psarianos, 2016. "Exploring the effect of including the environment in the neoclassical growth model," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 18(3), pages 339-358, July.
    14. Apergis, Nicholas & Payne, James E., 2011. "The renewable energy consumption-growth nexus in Central America," Applied Energy, Elsevier, vol. 88(1), pages 343-347, January.
    15. Katsoulacos Yannis & Metsiou Eleni & Tsionas Efthymios & Konstantakopoulou Ioanna, 2014. "Quantitative Price Tests in Antitrust Market Definition with an Application to the Savory Snacks Markets," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 12(1), pages 1-33, January.
    16. Ronald MacDonald & Flávio Vieira, "undated". "A panel data investigation of real exchange rate misalignment and growth," Working Papers 2010_13, Business School - Economics, University of Glasgow.
    17. repec:use:tkiwps:3232 is not listed on IDEAS
    18. Olimpia Neagu, 2019. "The Link between Economic Complexity and Carbon Emissions in the European Union Countries: A Model Based on the Environmental Kuznets Curve (EKC) Approach," Sustainability, MDPI, vol. 11(17), pages 1-27, August.
    19. E. M. Ekanayake & Mihalis Halkides & John R. Ledgerwood, 2012. "Inbound International Tourism To The United States: A Panel Data Analysis," International Journal of Management and Marketing Research, The Institute for Business and Finance Research, vol. 5(3), pages 15-27.
    20. Wilman-Santiago Ochoa-Moreno & Byron Alejandro Quito & Carlos Andrés Moreno-Hurtado, 2021. "Foreign Direct Investment and Environmental Quality: Revisiting the EKC in Latin American Countries," Sustainability, MDPI, vol. 13(22), pages 1-18, November.
    21. Chakraborty, Chandana & Nunnenkamp, Peter, 2006. "Economic reforms, foreign direct investment and its economic effects in India," Kiel Working Papers 1272, Kiel Institute for the World Economy (IfW Kiel).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ejn:ejefjr:v:6:y:2018:i:2:p:8-20. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Esra Barakli (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.