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The Relationship between Economic Inequality and Economic Growth - Case Study Example

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The paper 'The Relationship between Economic Inequality and Economic Growth' presents inequality which refers to a disparity between individuals or groups. The world we live in is wrought with many inequalities; these include gender inequality, political inequality, and economic inequality…
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The Relationship between Economic Inequality and Economic Growth
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Download file to see previous pages In comparison, economic inequality is far more quantifiable and measurable. To put it in simple terms, economic inequality is a disparity in income. This disparity can exist within a village, a country or between different countries. According to Ray “it permits one individual certain material choices while denying another individual those very same choices.” There are several methods to measure this inequality, which, I will elaborate on later.

According to noted economists Sen and Foster (1973), inequality is deeply interlinked with rebellion and the fall of dynasties. It has been said, that the French and Russian Revolutions were brought about ultimately by the inequality that persisted within the respective societies and the failure to address them. The relationship between inequality and growth or development is often controversial and existing research is still inconclusive in terms of ascertaining the actual cause and effect each variable has on the other. Development in the terminology of economics refers primarily to economic growth and expansion, which usually leads to an increase in incomes. The crux of equality or inequality is how much of the population (i.e. which segments) benefits from this growth. If only one segment of the population witnesses an increase in incomes than the economic, inequality exists. Different economists and researchers have come to different conclusions on the relationship between economic inequality and economic growth, these range from inequality having a positive impact on development to inequality causing economic stagnation. As mentioned before both of these conclusions are a cause for debate and neither has been accepted as definitive. What is clear, however, is the fact that both inequality and growth are affected by several factors that are independent of either. The many volumes of research and economic literature available on the subject focus on the basic question of whether development and inequality have a negative or a positive correlation in order to establish whether inequality is beneficial for development or whether growth has to be sacrificed in order to reduce inequality. ...Download file to see next pages Read More
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