The Implications of Economic Growth and Income Inequality on Poverty: An Analytical Study of the Libyan Economy

Abstract

      This research examines whether the economic growth and income inequality cause or reduce poverty in Libya from 2000 to 2023. With the help of the Vector Autoregressive (VAR) Model, the research estimates this dynamic relationship. The Theil Index measures income inequality, while individual consumption rates are used to reflect poverty levels. Economic growth is indicated by per capita real GDP.Both previous year poverty (POV_-1) and previous year income inequality (INQ_-1) have a positive impact on this year poverty (POV) according to the results. Interestingly, the elasticity of income inequality in affecting future poverty is quite high. A drop in income (or per capita GDP(GRW_-1) in the previous year is correlated with an increase in poverty (POV). However, the inflation (INF_-1) and political and security stability (Ps_-1) statistically have no impact on poverty in Libya.