Income inequality and economic growth: Provincial evidence from Vietnam

Abstract

This study examines the relationship between income inequality and economic growth across 63 Vietnamese provinces and centrally administered cities from 2018 to 2024. Using provincial panel data, the study applies pooled OLS, fixed effects, random effects, and feasible generalized least squares estimations. A non-linear specification is included to capture potential threshold effects, while control variables such as provincial competitiveness, labor quality, and average income are used to account for regional differences. The results reveal a non-linear relationship between income inequality and economic growth. Moderate inequality is associated with higher growth, whereas excessive inequality negatively affects provincial economic performance. Institutional quality and human capital also significantly contribute to regional growth. The findings suggest that inequality can support growth only up to a certain level, beyond which it becomes harmful to sustainable development. Policymakers should focus on preventing excessive inequality while improving institutional quality, competitiveness, and labor quality to promote inclusive and sustainable regional growth.