Equity and Economic Growth University of Warsaw, School of Economic science Zoljargal Munkhsaikhan

Introduction The relationship between equity and economic growth has long attracted the interest of researchers. Whether inequality helps or harms future economic growth? The issue remains contentious. Past studies find differing effects when considering rich and poor countries, regions versus nations and so on. The relationship between equity and economic growth has long attracted the interest of researchers. Whether inequality helps or harms future economic growth? The issue remains contentious. Past studies find differing effects when considering rich and poor countries, regions versus nations and so on.

Economic theories that hypothesize that income inequality harms growth can be grouped into three categories:

First, the political-economy approach hypothesizes that in unequal societies redistribute resources from rich to poor. Increase in income inequality inhibits economic growth.

Second, income inequality retards growth by encouraging social conflict within societies. In this manner, inequality results in more crime and unlawful activities, which threaten investment and property rights.

Third, the imperfect capital market hypothesis suggests that inequality is associated with credit barriers that reduce the ability of lower classes to invest in physical and human capital.

Theoretical review

Economic inequality: comprises all disparities in the distribution of economic and income. The term typically refers to inequality among individuals and groups within a society or among countries. Economic Inequality generally refers to equality of outcome, and is related to the idea of equality of opportunity. Economic inequality: comprises all disparities in the distribution of economic assets and income. The term typically refers to inequality among individuals and groups within a society or among countries. Economic Inequality generally refers to equality of outcome, and is related to the idea of equality of opportunity.

Gini Coefficient: Developed by an Italian statistician Corrado Gini in the 1910s, Gini Gini Coefficient: Developed by an Italian statistician Corrado Gini in the 1910s, Gini Coefficient is commonly used to indicate income inequality in a society. Gini Coefficient is a number which has a value between zero and one. As the value of the Coefficient rises, the higher the degree of income inequality in a society becomes Coefficient is commonly used to indicate income inequality in a society. Gini Coefficient is a number which has a value between zero and one. As the value of the Coefficient rises, the higher the degree of income inequality in a society becomes

A Kuznets curve: A Kuznets curve: Simon Kuznets argued that levels of economic inequality are in large part the result of stages of development. Kuznets saw a curve-like relationship between level of income and inequality, now known as Kuznets curve. Simon Kuznets argued that levels of economic inequality are in large part the result of stages of development. Kuznets saw a curve-like relationship between level of income and inequality, now known as Kuznets curve.

Economic growth: Economic growth: Several recent economists have investigated the relationship between inequality and economic growth using econometrics. In their study for the World Institute for Development Economics Research, They conclude that too much equality (below a Gini coefficient of 0.25) negatively impacts growth due to "incentive traps, free-riding, labour shirking, and high supervision costs

Robert Barro wrote a paper arguing that inequality reduces growth in poor countries and promotes growth in rich ones. Robert Barro wrote a paper arguing that inequality reduces growth in poor countries and promotes growth in rich ones. A number of other researchers have derived conflicting results, some concluding there is a negative effect of inequality on growth. A number of other researchers have derived conflicting results, some concluding there is a negative effect of inequality on growth.

Empirical research

The above-mentioned arguments reflect inequality does not always have negative or positive effect on economic growth directly The above-mentioned arguments reflect inequality does not always have negative or positive effect on economic growth directly

Gini Coefficient in the world Gini Coefficient in the world Gini Coefficient Place Survey year Gini Coefficient Place Survey year Gini Coefficient Place Survey year Gini Coefficient Place Survey year Hungary India Hungary India Denmark Spain Denmark Spain Japan Netherlands Japan Netherlands Belgium France Belgium France Sweden Pakistan Sweden Pakistan Czech Republic Canada Czech Republic Canada Norway Switzerland Norway Switzerland Slovak Republic Burundi Slovak Republic Burundi Bosnia and Herzegovina Yemen, Republic Bosnia and Herzegovina Yemen, Republic Uzbekistan Indonesia Uzbekistan Indonesia Finland Egypt, Arab Republic Finland Egypt, Arab Republic Albania Sri Lanka Albania Sri Lanka Macedonia, FYR Tajikistan Macedonia, FYR Tajikistan Germany Australia Germany Australia Slovenia Algeria Slovenia Algeria Rwanda Greece Rwanda Greece Croatia Israel Croatia Israel Kyrgyz Republic Ireland Kyrgyz Republic Ireland Ukraine Italy Ukraine Italy Austria United Kingdom Austria United Kingdom Ethiopia Vietnam Ethiopia Vietnam Ghana Moldova Ghana Moldova Romania New Zealand Romania New Zealand Belarus Jordan Belarus Jordan Luxembourg Azerbaijan Luxembourg Azerbaijan Kazakhstan Nepal Kazakhstan Nepal South Korea Georgia South Korea Georgia Poland Lao PDR Poland Lao PDR Bangladesh Estonia Bangladesh Estonia Bulgaria Armenia Bulgaria Armenia Lithuania Jamaica Lithuania Jamaica Latvia Gambia Latvia Gambia United States United States Singapore Singapore China China Hong Kong, Hong Kong, 2001

GDP per capita 2008 IMF GDP per capita 2008 IMF Place GDP per capita US$ Place GDP per capita US$ Place GDP per capita US$ Place GDP per capita US$ Hungary 19,499 India 2,800 Hungary 19,499 India 2,800India Denmark 37,266 Spain 30,621 Denmark 37,266 Spain 30,621 Japan 33,525 Netherlands 40,431 Japan 33,525 Netherlands 40,431 Belgium 36,235 France 34,208 Belgium 36,235 France 34,208 Sweden 37,245 Canada 39,183 Sweden 37,245 Canada 39,183 Czech Republic 25,395 United Arab Emirates 38,830 Czech Republic 25,395 United Arab Emirates 38,830 Norway 53,451 Switzerland 42,783 Norway 53,451 Switzerland 42,783 Uzbekistan 2,630 Australia 37,299 Uzbekistan 2,630 Australia 37,299 Finland 36,217 United Kingdom 36,523 Finland 36,217 United Kingdom 36,523 Albania 6,859 United States 46,859 Albania 6,859 United States 46,859 Germany 35,442 Hong Kong China 43,811 Germany 35,442 Hong Kong China 43,811 Rwanda 1,041 Rwanda 1,041 Ukraine 7,347 Ukraine 7,347 Austria 39,634 Austria 39,634 Ghana 1,500 Ghana 1,500 Belarus 12,291 Belarus 12,291 Luxembourg 82,306 Luxembourg 82,306 Kazakhstan 11,416 Kazakhstan 11,416 Korea, South 27,647 Korea, South 27,647 Poland 17,482 Poland 17,482

From the empirical studies, we find that there is rather robust negative relationship between inequality and economic growth in the developed countries and poor countries. Except some contradictions From the empirical studies, we find that there is rather robust negative relationship between inequality and economic growth in the developed countries and poor countries. Except some contradictions

Conclusion Studies of inequality and economic growth have been well conducted by many other scholars and organizations. But the inequality-economic growth debate remains unsettled. We see those contradictions in relationship between Kuznetz curve, Gini coefficient, economic growth and so on. Studies of inequality and economic growth have been well conducted by many other scholars and organizations. But the inequality-economic growth debate remains unsettled. We see those contradictions in relationship between Kuznetz curve, Gini coefficient, economic growth and so on.