An Analysis of Growth and Inequality in Sudan : Cointegration and Causality Evidence (1956-2003)

The relationship between growth and inequality has been analysed by a number of recent empirical studies. This paper re-examines the relationship between of growth and inequality for the period 1956-2003 for Sudan. It builds upon different models to investigate empirically the relationship between economic growth - as measured by GDP per capita growth - and inequality (the growth, inequality and poverty triangle hypotheses), using data from the national and international sources. We investigate the following hypotheses: i) whether growth, inequality and poverty are cointegrated using the Johansen approach and F-bound cointegration test, ii) whether growth Granger causes inequality, iii) and whether inequality Granger causes poverty. Finally, a VAR is constructed and impulse response functions (IRFs) are employed to investigate the effects of macroeconomic shocks. The results suggest that growth, poverty and inequality are cointegrated when poverty and inequality are the dependent variable, but are not cointegrated when growth is the dependent variable. In the long-run the causality runs from inequality, poverty to growth, to poverty. In the short-run causal effects, runs from poverty to growth. Thus, there is unidirectional relationship, running from growth to poverty, both in the long- run and short run