Economic growth and income distribution in Peru

Abstract

This article analyzes the causal determinants of income distribution in Peru (IDP) during the period 1985-2017. There is empirical evidence suggesting that the GDP per capita and the slowed and unsustained economic growth of the economy have negatively impacted IDP. This can be conceptualized as a W-shaped causal relationship, in contrast to Kuznets' inverted-U hypothesis, thus reflecting a dual economy with productivity differences, low levels of human capital, and institutional weakness. This article contributes to the debate by making several recommendations, namely: balancing the market-state-society relationship with free-market and non-rentier economic policies, human capital investment policies, innovation and technology, and strengthening the social capital (geared towards endogenous economic growth) of inclusive and sustainable human development.