The impact of income inequality on economic growth: insights from Vietnam

Abstract

This study measures the effect of wealth inequality on economic growth at the local district level by utilizing data from the Vietnam Household Living Standards Survey from 2010 to 2018, the Global 30-Second Elevation Dataset, and nighttime light intensity provided by NOAA using data from the U.S. Air Force weather satellites. District economic growth is measured by income inequality levels, land slope, and land ruggedness. Unlike previous studies, to avoid potential endogeneity issues, we use luminosity of night lights as an indicator of local economic growth. The advantage of this index is that it compensates for data limitations in calculating GDP or average expenditures. The results indicate that income inequality positively impacts economic growth in districts. This finding contradicts the traditional view that income inequality can cause social and economic issues and may even slow economic growth. Income inequality is beneficial for a developing country without excessively high income disparities like Vietnam. Land slope is advantageous for regional economic growth, whereas land ruggedness poses challenges to economic growth