The Impact of Income Inequality on Economic Growth in Algeria: The ARDL Approach

Abstract

This paper investigates the impact of income inequality on economic growth in Algeria over the period 1980-2015, by using the Autoregressive Distributive Lags (ARDL) approach and the Error Correction Model (ECM). The findings of Bound-test suggest that there is a long-run equilibrium between income inequality and economic growth. There is a positive and significant impact of income inequality on growth in Algeria, an increase in inequality by 1% will enhance economic growth by 7 % in the long run. However, reducing income and wealth inequality is a necessity to prevent further increases and maintain the sustainable growth in Algeria.