Income inequality and economic growth in Asian countries

Abstract

This study examines income inequality across 53 Asian countries from 1990 to 2021, focusing on the application of the Kuznets’ curve theory. This hypothesis states an inverted U-shaped relationship exists between economic growth and inequality, suggesting an initial increase followed by a decline in income disparity as GDP per capita growth. We analyzed data accruing the share of income of the Top 1% income holders of each country, by regions and for the continent as a whole. We employed a fixed-effects panel model with GDP per capita, squared GDP per capita and cubed GDP per capita as explanatory variables. Our results include mixed evidence of the completion of the curve: Asia overall supports the Kuznets’ curve however the regional analysis reveal differences. While East and South Asia present with significant U-shaped relationship patterns, Central Asia shows an inverted N-shaped relationship. Referencing to West and Southeast Asia, they demonstrate similar U-shaped trends however not statistically significant. This research contributes by offering region-specific insights into inequality dynamics relating to economic growth to provide policymakers with tools to target interventions for inclusive development across Asian countries.