Relationship between per Capita National Income and Income Inequality: Is the Kuznets Hypothesis True for Nigeria?

Authors : James Tumba Henry, Phillips Asaph Panotani.

Volume/Issue : Volume 4 - 2019, Issue 4 - April

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The main concern of this study is to examine the relationship between per capita national income (economic growth) and income inequality in Nigeria from 1981 to 2017. The study employed descriptive and inferential design to investigate the relationship among the variables (Inequality proxied by GINI index, GDP per capita, GDP per capita squared and gross national savings) used in this study. The Vector Error Correction Model (VECM) and VEC Granger Causality/Block Exogeneity Wald Tests were used for this study because all the variables were integrated of order I(1). The hypotheses used in this study were tested at 5% level of significance. The results revealed that there is a positive relationship between per capita income and income inequality. Similarly, the Kuznets U-shaped hypothesis was found to be true. It also showed that when economic growth (GDP per capita) is doubled, income inequality will fall by 87.36% in the long-run. The causality result revealed a unidirectional causality from income inequality to gross national savings. Based on these findings, it was recommended that the Nigerian government should urgently pursue economic programmes that can promote the establishment and survival of micro, small and medium enterprises.

Keywords : per Capita National Income, Income Inequality, Kuznets U-Shaped Hypothesis.


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