Abstract:
Income inequality is one of the biggest challenges for many countries as it can affect
economic growth, inflation, unemployment, etc. This study focuses on the example of
Kazakhstan, where President Tokayev stated that income inequality has reached unacceptable
levels. The research question addressed is the impact of economic growth on income inequality
in Kazakhstan.
The study used a positivist approach and quantitative methods for analyzing panel data
for the period from 2000 to 2021, covering 14 regions of Kazakhstan. The analysis focuses on
the relationship between GDP per capita and the Gini coefficient, a widely used measure of
income inequality. However, in this case, the problem of reverse causality arises, then if not only
economic growth affects income inequality, but also vice versa. To address this issue, the study
is based on different methods. The study uses three methods to analyze the relationship
between income inequality and economic growth: OLS method, panel data method (fixed effects
model, random effects model) and instrumental variable model.
The results of the analysis indicate a negative relationship between economic growth and
income inequality in Kazakhstan. In particular, as GDP per capita increases, the Gini coefficient
tends to decrease, suggesting that economic growth is associated with a more equal distribution
of income.
An instrumental variable (IV) model that addresses potential endogeneity issues provides
the most robust estimate of this relationship. The results of the IV regression model support the
hypothesis that economic development can lead to a more equitable distribution of income in
Kazakhstan.
These findings have important policy implications for Kazakhstan. However, it is critical for
policymakers to consider other factors that influence income distribution, such as education,
social welfare programs, and institutional factors.
In conclusion, this study contributes to the existing literature by providing empirical
evidence of the relationship between economic growth and income inequality in Kazakhstan. It
highlights the importance of economic development in achieving more equitable income
distribution and provides valuable information for socio-economic policy development.
