Impact of Income Inequality on human development in Emerging Economies- a Panel Data Analysis

Emerging Economies have been experiencing stupendous economic growth since the early 2000s. In spite of the growth, these economies are still plagued with persistent income inequality. Consequently, this gave rise to an imperative debate around the distribution of income and its impact on development. The present research focuses on examining the impact of income inequality (measured by Gini Coefficient) on the development (measured by HDI) in emerging economies using the Standardised World Income Inequality Database (SWIID), 2020. HDI-a composite index comprising of education, health and income indices is coherent with the aim to observe a deeper and wider implications of income inequality on development. The study utilizes panel data for nine emerging economies namely; Argentina, Chile, Russia, Brazil, China, Mexico, India, Indonesia and South Africa from 2008–2017. The paper employs four empirical models of OLS, LSDV, Fixed effect and Random effect for analysis. Drawing from existing literature, it was observed that inequality had a negative impact on transmission channels such as education and health. The research showed a negative correlation of -0.54 between human development and income inequality. Additionally, the empirical models also pointed towards an inverse relationship between human development and income inequality.