A causality test between income, inequality and poverty – empirical evidence from South-East Asia

ABSTRACT

The income–inequality relationship is often addressed in the literature and studies also reporting significant effects between income and the various measures of inequality. An important question is whether there is not only correlation but also causality in the income–inequality nexus. For investigating the latter purpose, a Granger causality test based on out-of-sample forecast errors is applied with data from 2006 to 2018 for per capita real income, Gini coefficients and poverty rates for sixty-one provinces in Vietnam. In this case, there is not detected any significant effects from inequality (Gini) or the level of poverty rates to income – and likewise no evidence of the reverse causality.

KEYWORDS:

• Income per capita
• Gini coefficient
• poverty rate
• causality

JEL CLASSIFICATION:

• C13
• D63

Acknowledgement

This research is funded by the Vietnam National Foundation for Science and Technology Development (NAFOSTED) [Grant no. 502.01-2019.04].

Disclosure statement

No potential conflict of interest was reported by the authors.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

¹ General Statistics Office, Ha Noi, Vietnam.

² Alternatively, Granger and Huang (1997), the in-sample average of the fixed effects is included when calculating the forecast errors. The results from this approach are similar to the findings in Section 3, apart from increased values of the forecast errors.