Macroeconomic determinants of income inequality in India and Pakistan

Abstract

The objective of this study is to determine the macroeconomic determinants of income inequality in India and Pakistan. The study uses panel data from 1973 to 2015 and utilizes FEM model to estimate the parameter. Following general to specific methodology macroeconomic determinants of income inequality are found. The study finds the following macroeconomic variables as determinants of income inequality i.e. per capita GDP, government consumption expenditure, fertility rate, value addition by agricultural sector, per capita arable land, urban population, and globalization. Special attention must be given to reduce high fertility rate, especially in the lower class of the society.

Keywords

• income inequality
• macroeconomic determinants
• panel data
• India
• Pakistan