Inequality and its Impact on Economic Development

The subject of the study is socio–economic inequality in its impact on the parameters of economic development. The objectives of the work are to identify the dependence of the level of inequality on the macroeconomic parameters of development: the growth rate, the level of national poverty, the human development index, as well as to determine the conditions of the Hay effect and the effect of social stagnation. The research methodology is based on the theory of economic development, methods of measuring development and inequality, comparative analysis, elements of mathematical modeling. The result of the application of the indicated research methods was the establishment of a condition for reducing the level of inequality by the stock coefficient for the sites of “social stagnation”, when population growth is accompanied by the absence of an increase in per capita income, as a result of which the population growth rate becomes lower than the sum of the growth rates of median incomes and the income share of the poorest part of the population. The condition for the realization of the Sena effect is mathematically presented: the ratio of the income shares of 10% of the poorest part of the population of the two countries should be less than the inverse ratio of the population, if the criterion of social development is the income level of the poorest part of the population. It is concluded that whatever forms inequality acquires in terms of income or available opportunities, it is strongly determined by the amount of personal disposable income, since the vast majority of social and other functions in society are associated with costs. This result of the study is a consequence of the systemic action of factors and the connectivity of many types of inequality with each other. The use of modeling hardly makes it possible to solve this problem, creating permanent relevance to it due to the fact that policy focuses on reducing poverty, but not on inequality, although it is the latter circumstance that needs to be emphasized.

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