Thesis (MSc) - Cyprus International University. Institute of Graduate Studies and Research Economics Department

Includes bibliography (sheets 49-54)

ABSTRACT
This research investigated the relationship between income inequality and economic
growth by examining the role of human capital thus giving this research a different
perspective that has long been overlooked by previous studies. The Organization for
Economic Cooperation and Development (OECD) nations includes developed as well
as developing nations therefore, fashioned appropriately as the case study for this
research seeing as we observe inequality – in pay, income, gender etc. – even in the
most developed nations. Although the OECD economies jointly have in their capacity
a great economic advancement both technologically and in terms of the monetary
system, they seem to lack the proper equipment when it pertains to mitigating the
effects of the great disparities amongst their citizens as a result of income inequality.
Thus, this research attempt to determine how much of an effect income inequality has
on economic growth by examining the role of human capital within the periods of 1990
– 2020. Using an unbalanced panel data for 38 OECD nations we ran descriptive
analysis and other forms of regressions by estimating the simple growth model put
forward by Solow (1956) in his literature. Multipliers like Pagan Lagrangian and
Breusch test were ran in other to determine if pooled OLS Regression or Random
effects model were the best model to analyze The Fixed Effects Model (FEM). These
tests carried out showed that inequality does have a negative effect on the economic
growth with the OECD community. According to the panel cointegration test done it
was determined that there is a long-term association between income inequality and
economic growth.
Keywords: Development, Economic Growth, Gini Coefficient, Human Capital
Income Inequality, Kuznets Curve