Innovations, Income Inequality, and Economic Growth Linkages: A Cross Country Analysis

Abstract

Existence of intricacy of linkages amongst the innovation, income inequality and economic
growth, have been considered in a thoughtful manner in this paper. The effects of the innovation
on income inequality have been underscored in one way and the sways of innovation and income
inequality together on economic growth on the other way. This research forms the panels of high,
middle and low income countries. It is pertinent to mention that each panel holds 20 countries and
time length ranges from 1996 to 2021. The Generalized Method of Moment (GMM) technique is used
to obtain empirical evidence. The results reflect that innovation on economic growth turns out to be
substantial indicator in economic growth in high income countries and causes reduction in income
inequality, whereas innovation is least contributing factor in middle income countries and reflects
insignificant impact on income inequality. On the other side, innovations are impactful in economic
growth and have been imperious reducing the income inequality. Income inequality leaves adverse
impact on economic growth in all the sampled countries. On the basis of findings, it is proposed to
increase the investment on R&D which will not only further help opening the employment avenues
but will also reduce the income inequality to experience the sustainable macroeconomic stability