Economic Growth and Income Inequality

Description

– Economic Growth and Income Inequality –

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Abstract

The research aims to find the relationship between income inequality and economic growth in the Brazilian economy.

Economic growth and income inequality are defined in the light of academic literature and their varied effect on wellbeing are explored. The research methodology selected is deductive.

The data have been collected through secondary sources and a multiple regression model is used to study the relationship between the economic performance and income inequality in Brazil.

Contrary to many previous studies, the findings of the research suggest a significant positive relationship between these two variables. Newer and reliable data were used for these estimations.

Other findings of the study are that human and physical capital have significant positive effect on growth. It was also concluded that, unlike many recent country and cross-country studies, Brazil’s income inequality does not hinder its growth.

Introduction

1.1 Background of the Study

Brazil is a developing Latin American country. Its political and economic growth over the past three decades, in which annual GDP growth rate averaged 3.2% has spurred research worldwide.

Today, Brazil ranks as the 7th largest economy in the world (by PPP GDP) with a per capita GDP of $15, 390 (World Bank, 2017). Despite the recent economic turndown, the growth rate is expected to increase in the near future and its economic power is likely going to overtake even more countries.

Politically, the economy has experienced tremendous success and international recognition. It has hosted some of the world’s biggest events. Among these are the FIFA World Cup in 2014 and most recently, the 2016 Summer Olympic Games. Figure 1 shows Brazil’s GDP per capita trend from 1980 to 2016.” 

Brazil has one of the highest income inequalities in the world despite its impressive growth rates. This is evident in its Gini coefficient.

The United Nations Department of Economic and Social 4,000.00 6,000.00 8,000.00 10,000.00 12,000.00 14,000.00 16,000.00 18,000.00 GDP Per Capita Year GDP Per Capita (PPP) 5 Affairs (2015) defines Economic or income inequality as “how economic variables are distributed among individuals in a group, among groups in a population, or among countries”.

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