The effect of Income Inequality on Imports of Goods and Services in Selected Developed and Developing Countries

In the current structure of world economy، imports play an important role in the economic development strategy. Although taking the suitable policies for the imports of goods and services is important، but taking the correct strategy is subject to factors affecting imports. In the most of empirical studies، imports are a function of real income and real exchange rate. So، the effect of income inequality on imports of goods and services has less been investigated. Whereas، increase in income inequality causes an increase in the purchasing power of high income people and demand for imported luxury goods and also causes a change in the composition of domestic and imported consuming goods. This study examine the effect of income inequality on import of goods and services in 17 developed countries and 18 developing countries in the period 1990-2010 using generalized method of moment (GMM) analysis. The results indicate that there is a positive relationship between income inequality and imports of goods and services in developed countries; while this relation is negative in developing countries. Furthermore، the relationship between GDP and imports of goods and services is positive in both groups of countries، while the relationship between real exchange rate and imports of goods and services is negative in both groups. Thus، policy makers should redistribute income and wealth in favor of the low income people and motivate them to participate in the production sectors، reduce the inequality gap and improve their competitiveness power in the market and enhance the income from the abroad.