The Effect of Income Inequality on Human Development

Income inequality is how unevenly income is spread across a population. This paper looks at the effects of income inequality on human development through analyzing cross sectional data with multiple linear regression models. The dependent variable in this study is a country’s Human Development Index (HDI) in 2018. The primary explanatory variable is a country’s Gini coefficient from 2010-17. This paper hypothesizes that higher levels of income inequality will have a negative effect on human development as this often results in a misallocation of resources. The models support this hypothesis, but the exact degree of the ceteris paribus effect is still not fully clear