TESTING THE RELATIONSHIP BETWEEN ECONOMIC GROWTH AND INCOME INEQUALITY IN EGYPT FROM 1990 TO 2017: A VAR MODEL ANALYSIS

Abstract

Quite many studies have been piloted on the relationship between economic growth and income disparity, with varying results from many countries. The article explores the two-way relationship between economic development and income inequality in Egypt between 1990 and 2017. The study uses the VAR model and variance decomposition to answer the question. Is there a cointegration relationship between these two variables? The results show that economic growth and income inequality have a cointegration relationship; that is, there is a causal effect between the two variables. In this study, the authors have found a positive co-causal relationship between the two research variables with lag 2.