SORTING OUT SYNERGY AMONG INEQUALITY, REDISTRIBUTION AND ECONOMIC GROWTH: RECENT EVIDENCE FROM SELECTED ASIAN COUNTRIES

A persistent increase in income inequality has raised concerns about its potential impact on economic performance of developing countries and at the same time it brings up the need for redistribution of income. This study is an attempt to explore this contrivance. The study uses data of twelve Asian developing countries for the period 1996-2013. Seemingly Unrelated Regression technique has been used for estimation purposes. The results of the study reveal that income inequality has negative impact on economic growth, while redistribution effects economic growth positively. The study finds the existence of inverse bidirectional causality between: inequality and growth; redistribution and inequality; however there is unidirectional causality observed between redistribution and economic growth which runs from redistribution to economic growth. The study suggests that better redistribution policies for reducing inequality and enhancing economic growth need to be formulated and implemented in these countries for economic prosperity.