ECONOMIC GROWTH A CATALYST TO INCOME INEQUALITY: AN EMPIRICAL STUDY OF RUSSIA

Abstract

The main objective of the study is to empirically examinethe impact of income inequality on economic growthof Russian Federation. Annual time series data has been taken from 1988 to 2017. Phillips-Perron test is applied to make the data stationary at level and first difference. ARDL Bound approach to cointegration is used to check the long run relationship between income inequality and economic growth. The long run and the short run results show that there is a positive and significant impact of income inequality on economic growth of Russia. Furthermore, the error correction term (ecm) is statistically significant at 5% and has a negative sign. The value of ecm is -0.80 which shows that 80% of the disequilibrium in the level of Gross Domestic Product (GDP) of the previous year’s shock adjust back to the long run equilibrium in the current year.