Economic Growth, Income Inequality, and Poverty Nexus in Peru

Abstract

This study investigates the relationship between economic growth, income inequality, and poverty in Peru in the period 1997-2019 by using the Autoregressive Distributed Lag (ARDL) model. The study founds a negative and significant relationship between economic growth and poverty both in the short and long run. The result also shows a positive and significant relationship between income inequality and poverty both in the short and long run. Moreover, the result also reveals that by reducing the level of income inequality, economic growth indirectly reduces the poverty headcount ratio. Furthermore, the result also shows that by promoting economic growth, the reduction in income inequality indirectly reduces the poverty headcount ratio. This implies that growth is a necessary but not a sufficient condition for poverty reduction. Therefore, as the reduction in the level of income inequality increases the poverty reduction effect of economic growth, this study suggests that governments should strengthen policies that would aim at reducing the level of income inequality, such as progressive taxation, social safety nets, and investment in infrastructure, education, and healthcare; which can help to promote more equitable income distribution and poverty reduction.

Date of Award	30 Jun 2023
Original language	English
Awarding Institution	University of Namur
Supervisor	Mary Van Overbeke (Supervisor) & Stephanie Weynants (Co-Supervisor)