IDEAS home Printed from https://ideas.repec.org/a/ers/ijebaa/vxy2022i2p178-200.html
   My bibliography  Save this article

Determinants of Income Inequality in Ethiopia

Author

Listed:
  • Assefa Belay

Abstract

Purpose: The main objective of this study is to analyze determinants of income inequality in Ethiopia from (1988 to 2018). Design/methodology/approach: This study used quantitative research approach and an explanatory research design in order to achieve its objectives. The method of analysis was econometrics analysis. This paper used Autoregressive Distributed Lag (ARDL) and Error Correction Model (ECM) in order to investigate the long-run and short run relationship between the dependent variable (income inequality) and its determinants. To test stationary Augmented Dickey –Fuller (ADF) test and Phillpes Perron (PP) test were used. The error correction coefficient, estimated at -0.84277 is highly significant, has the correct negative sign, and imply a very high speed of adjustment to equilibrium. Findings: According to the econometrics analysis, real GDP per capita and unemployment rate are the main determinants of income inequality for Ethiopia based on ARDL model estimation result, R-squared is 0.7568. This implies that 75.68 % of the income inequality function is explained by the selected explanatory variables. If the value of R-Squared is higher, that model is the greatest the goodness of fit. Therefore, is the R-Squared in the regression model reveals that there is good fitness of value for a given result. The overall model is statistically significant because of P (F- Statistics) is 0.0009, which is less than 5% percent. Practical implications: According to the research, the paper gives some policy recommendations. The government or other responsible bodies should focus on the country’s growth and development, decreasing unemployment rate, inflation rate, the expansion of education access and the support of the social state. Originality value: This is an original research for the state of Ethiopia. The use of specific econometric techniques, ARDL, ECM, VIF, make this research unique.

Suggested Citation

  • Assefa Belay, 2022. "Determinants of Income Inequality in Ethiopia," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 178-200.
    • Handle: RePEc:ers:ijebaa:v:x:y:2022:i:2:p:178-200
    as

    Download full text from publisher

    File URL: https://ijeba.com/journal/772/download
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Venus Khim-Sen Liew, 2004. "Which Lag Length Selection Criteria Should We Employ?," Economics Bulletin, AccessEcon, vol. 3(33), pages 1-9.
    2. Oded, Galor, 2011. "Inequality, Human Capital Formation, and the Process of Development," Handbook of the Economics of Education, in: Erik Hanushek & Stephen Machin & Ludger Woessmann (ed.), Handbook of the Economics of Education, edition 1, volume 4, chapter 0, pages 441-493, Elsevier.
    Full references (including those not matched with items on IDEAS)

    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. Bloch, Harry & Rafiq, Shuddhasattwa & Salim, Ruhul, 2015. "Economic growth with coal, oil and renewable energy consumption in China: Prospects for fuel substitution," Economic Modelling, Elsevier, vol. 44(C), pages 104-115.
    2. Markus Brueckner & Daniel Lederman, 2018. "Inequality and economic growth: the role of initial income," Journal of Economic Growth, Springer, vol. 23(3), pages 341-366, September.
    3. Jun, Bogang & Hwang, Won-Sik, 2012. "Financial Hurdles for Human Capital Accumulation: Revisiting the Galor-Zeira Model," MPRA Paper 46317, University Library of Munich, Germany.
    4. Ghosh, sudeshna, 2017. "Education Attainment Forecasting and Economic Inequality United States," MPRA Paper 89712, University Library of Munich, Germany.
    5. Grigori Fainstein & Igor Novikov, 2011. "The Comparative Analysis of Credit Risk Determinants In the Banking Sector of the Baltic States," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 20-45, June.
    6. Matsuo, Miki & Tomoda, Yasunobu, 2012. "Human capital Kuznets curve with subsistence consumption level," Economics Letters, Elsevier, vol. 116(3), pages 392-395.
    7. Garg, Bhavesh & Prabheesh, K.P., 2021. "Testing the intertemporal sustainability of current account in the presence of endogenous structural breaks: Evidence from the top deficit countries," Economic Modelling, Elsevier, vol. 97(C), pages 365-379.
    8. Abdul Rishad & Sanjeev Gupta & Akhil Sharma, 2021. "Official Intervention and Exchange Rate Determination: Evidence from India," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 13(3), pages 357-379, September.
    9. Franciscos Koutentakis, 2012. "Public Education and Democracy in a Simple Model of Persistent Inequality," Working Papers 1204, University of Crete, Department of Economics.
    10. Bolboaca, Maria, 2019. "The Impact of Technological Change," Economics Working Paper Series 1902, University of St. Gallen, School of Economics and Political Science.
    11. Ylenia Brilli & Marco Tonello, 2015. "The contemporaneous effect of education on adolescent crime. Mechanisms and evidence from regional divides," CHILD Working Papers Series 41 JEL Classification: I2, Centre for Household, Income, Labour and Demographic Economics (CHILD) - CCA.
    12. Marroquín Arreola, Juan & Rios Bolívar, Humberto, 2012. "Gasto público, permanencia en el poder y crecimiento económico /Public Spending, Staying Power and Economic Growth," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 30, pages 363(22)-363, Abril.
    13. Armenia Androniceanu & Irina Georgescu & Ionuț Nica & Nora Chiriță, 2023. "A Comprehensive Analysis of Renewable Energy Based on Integrating Economic Cybernetics and the Autoregressive Distributed Lag Model—The Case of Romania," Energies, MDPI, vol. 16(16), pages 1-28, August.
    14. Michaelides, Panayotis G. & Milios, John G. & Konstantakis, Konstantinos N. & Tarnaras, Panayiotis, 2015. "Quantity-of-money fluctuations and economic instability: empirical evidence for the USA (1958–2006)," MPRA Paper 90145, University Library of Munich, Germany.
    15. Jung, Young Cheol & Das, Anupam & McFarlane, Adian, 2020. "The asymmetric relationship between the oil price and the US-Canada exchange rate," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 198-206.
    16. Asongu, Simplice A., 2014. "A note on the long-run neutrality of monetary policy: new empirics," European Economic Letters, European Economics Letters Group, vol. 3(1), pages 1-6.
    17. Jelilov Gylych & Abdullahi Ahmad Jbrin & Bilal Celik & Abdurrahman Isik, 2020. "The Effect of Oil Price Fluctuation on the Economy of Nigeria," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 461-468.
    18. Asongu Simplice, 2013. "Does Money Matter in Africa? New Empirics on Long- and Short-run Effects of Monetary Policy on Output and Prices," Working Papers of the African Governance and Development Institute. 13/005, African Governance and Development Institute..
    19. Ralph Hippe & Roger Fouquet, 2024. "The Human Capital Transition and the Role of Policy," Springer Books, in: Claude Diebolt & Michael Haupert (ed.), Handbook of Cliometrics, edition 3, pages 411-457, Springer.
    20. Simplice Asongu, 2013. "How Would Population Growth Affect Investment in the Future? Asymmetric Panel Causality Evidence for Africa," African Development Review, African Development Bank, vol. 25(1), pages 14-29.

    More about this item

    Keywords

    Economic growth; income inequality; ARDL; ECM; VIF; Ethiopia.;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    Statistics

    Access and download statistics

    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:ers:ijebaa:v:x:y:2022:i:2:p:178-200. 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: Marios Agiomavritis (email available below). General contact details of provider: https://ijeba.com/ .

    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.