The Linkage between Economic Development and Income Distribution in MIST Countries: Panel ARDL Analysis

Economic development and income distribution are central issues in economics, with their relationship being critical for sustainable development. Imbalances in income distribution can slow economic growth and reduce societal welfare. Thus, development policies should prioritize not just growth but also equitable income distribution. A balanced income distribution enhances social acceptance and ensures the sustainability of development. This study examines the relationship between economic development and income distribution in MIST countries (Mexico, Indonesia, South Korea, and Turkey) from 1990 to 2022, as classified by economist Jim O’Neill. Using a panel ARDL model, the findings show that economic development reduces income inequality. However, industrialization, a marker of technological progress, tends to increase inequality. These insights have significant policy implications. To mitigate income inequality, MIST countries should emphasize the three pillars of economic development: education, health, and growth. Policymakers must reassess industrialization strategies, promoting renewable energy while addressing inequality. Subsidies to non-renewable sectors and improved vocational training for unskilled labor can reduce the dual economic structure created by technological advancements. By implementing vocational programs and orientation initiatives, governments can limit the adverse effects of industrialization on unskilled workers, ensuring more equitable growth.