Economic Growth and Income Inequality in Selected Islamic Countries: New Evidence by Panel Vector Autoregressive

The provision of social justice and the elimination of poverty and deprivation through the creation of a balance in the distribution of income and wealth among the people is taken into consideration a Long ago time. Meanwhile, two categories of economic growth and fair distribution of income, which are among the main economic issues, are controversial. In the theoretical foundations of the conventional economy, growth is prior on the equal distribution of income. Accordingly, in the current study, these two issues will be tested for selected Islamic countries during the years 2012-2016. The results show that there is a two-way causal relationship between economic growth and income distribution. By analyzing the impulse response function, it was found that improvement in income distribution situation leads to a positive response from economic growth. Nevertheless, the positive shocks of economic growth make the distribution of income more inappropriate. Therefore, the interaction between economic growth and inequality of income in Islamic countries is contrary to Islamic teachings.