The Relationship Between Economic Growth and Income Inequality

Abstract

The objective of this work is to study the nature of the relationship between income inequality and economic growth in Tunisia. To do this, we started with a review of the literature. Then we conducted an empirical study on the Tunisian case over the period 1984-2011. The main results show that economic growth and openness exchange constituted aggravating factors of inequalities and that these effects are accentuated with the accelerated process of trade liberalization in the country. However, human capital and financial development appears to have contributed to the alleviation of this problem.The second result shows that inequality had a negative effect on economic growth and that this effect appeared more after the acceleration of the process of opening exchange. This result can be explained by the fact that the country has reached an "unbearable" level of inequality. Similarly, it can be explained by the failure of redistribution policies.

Keywords

• Inequality, growth, liberalization, Tunisia