Econometric Analysis on Unemployment, Inequality and Economic Growth in India

In this paper the author tried to find out the long run association between unemployment rate, GDP growth rate and income inequality in the post independent period in India from 1951 to 2023 by applying cointegration and vector error correction model. The paper found out that there is one cointegrating equation among the three variables where VECM implies that the change of unemployment rate and GDP growth rate is inversely related while the change of unemployment and the change of income inequality is positively related in the long run. The former is significant and the latter is insignificant in case of cointegrating equation which is convergent towards equilibrium with a speed of adjustment of 2.4% per year. There is short run causality between unemployment rate, GDP growth rate and income inequality. The VECM is stable and non-stationary having autocorrelation and multivariate normality problems.