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Social Inequality, Investment, and Economic Growth

Social Inequality, Investment, and Economic Growth

Journal of Economic Regulation, , Vol. 10 (no. 4),

Many generations of economists have been investigated the problems of poverty, social inequality, and equitable distribution of wealth in society for years. On the one hand, excessive inequality in income distribution exacerbates social tensions, leads to political instability and, ultimately, hinders economic development. On the other hand, the state policy aimed at overly active mitigation of material imbalances in society has a restraining effect on investment activity, which adversely affects the growth of the economy. Therefore, the paradigm began to dominate, according to which some optimal level of differentiation of incomes maximizes economic growth. This level not reducing the incentives for enrichment and not leading to impoverishment of the bulk of citizens. The article presents econometric models demonstrating the nature of the influence of the Gini index on GDP growth rates, as well as the volume of GDP on the value of investments in fixed assets. The results of the evaluation of models based on data from 80 leading economies of the world allowed us to determine the level of social inequality in Russia, maximizing economic growth. Calculations have shown that really extremely low and excessively high levels of material differentiation constrain economic growth. Also for Russia, the article contains forecasts of GDP growth under various scenarios of changes in the Gini index and the volume of investments in fixed assets.

Keywords: social inequality; Gini index; Kuznets curve; income inequality; investments

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