Income Inequality, Economic Crisis and International Trade: Theory and Evidence From the Perspective of Sustainable Development

Abstract

Issues related to economic development and growth are oft discussed to illustrate the health of a nation. However, such development is constrained by the inequality parameter of the representative society. Again, economic fluctuations arising from several crises may hinder the representative nation from getting on a smooth path to development. Now, augmentation of crises along with the presence of inequality may trigger economic vulnerabilities, leading to unsustainable economic development. Against this backdrop, we initially frame a theoretical model to capture the above-mentioned issues and try to derive plausible economic interpretations for the same. To verify the same in a more robust manner, we consider a panel of 30 developing countries from Africa, spanning the time period 1980–2020. Both the health status and the education status of our panel of countries are used to explore the sustainability issue in the presence of income inequality. All data have been collected from the World Development Indicators (WDI) and Standardized World Income Inequality Database (SWIID) (Table 21.1

Table 21.1.

Variables Description.

Variables	Description
PCGHE	Domestic General Government Health Expenditure Per Capita (Current US$)
PCPHE	Domestic Private Health Expenditure Per Capita (Current US$)
PCOPE	Out-of-Pocket Expenditure Per Capita (Current US$)
LE	Life Expectancy at Birth, Total (Years)
IMR	Mortality Rate, Infant Per 1,000 Live (Birth)
GEE	Government Expenditure on Education, Total (% of GDP)
PSE	School Enrolment, Primary (% gross)
SSE	School Enrolment, Secondary (% gross)
PCGDP	GDP Per Capita (Current US$)
GRCGDP	GDP Per Capita Growth (Current US$)
FDI	Foreign Direct Investment, Net Inflow (% of GDP)
POP	Population, Total
GINI	Gini Index of Net Income Inequality

). We have divided the entire timespan into two separate time periods on the basis of the 2008 crisis, to test the impact of this crisis on sustainable development in terms of health and education of the selected African nations. We have used a two-stage dynamic panel model to analyse the inherent dynamics within the health and education indicators and also to trace the consequences of unsustainability for the selected panel. Our study suggests that policymakers in African countries should focus on implementing health and education-oriented programmes augmented with sector-specific liberalisation policies, with particular stress given on the aspect of sustainability rather than on growth alone.

Citation

Agarwal, K., Sen, S., Teame, G.T. and Chatterjee, T. (2024), "Income Inequality, Economic Crisis and International Trade: Theory and Evidence From the Perspective of Sustainable Development", Chatterjee, T. (Ed.) International Trade, Economic Crisis and the Sustainable Development Goals, Emerald Publishing Limited, Leeds, pp. 315-326. https://doi.org/10.1108/978-1-83753-586-620241021