Can We Discern the Impact of Income Distribution on Poverty and Economic Growth in Asian Economies?


  • Zaheer Abbas
  • Abdul Raheman


Okun Hypothesis of Trade Off, Poverty, Income Inequality, Growth.


It has become hard to believe in historically influential okun hypothesis of tradeoff between inequality and economic growth. Despite theoretically costly persuasion of equality like disincentive to work and leaky bucket, trade off does not exist when economic growth is looked over longer horizons. Igniting economic growth is much less important than sustaining economic growth. Inequality matters for economic growth and poverty reduction all over the world and Asian countries are no exception. Dissatisfaction resulting from unequal distribution of wealth is believed to contribute much of unrest in the middle east as well as south Asian economies. After empirical investigation of ten Asian economies over period of 1995-2017, this paper documents that economic growth and inequality are no more the two sides of same coin rather they appear to be at war in the long run. Indeed, inequality is essential for creations of incentives to work hard; however, inequality beyond acceptable level not only hinders economic growth but also creates poverty. Poor are less prepared to face declines in their incomes and resultantly inequality is equal to indebtedness. Unequal distribution also leads to social problems and thus belongs in the pantheon of important ingredients of growth as well as poverty reduction. The findings are robust to various measures of income inequality and poverty as well as various specifications of equations.