DOI kodi: 10.52340/ekonomisti.2026.02.03

Annotation. This article presents a comparative analysis of the interrelationship between income inequality, economic growth, and poverty indicators in the global economy and in the context of Azerbaijan over the period 2015–2024. Despite the sustained growth of GDP at the global level, the average Gini coefficient worldwide has remained high (within the range of 0.646–0.667) owing to the inequitable distribution of the value added generated, reaching its maximum (0.661–0.662) in particular under the impact of the 2020 pandemic. These trends weaken the social efficiency of economic growth and render the institutional intervention of the state indispensable for the realisation of the principles of inclusive development.

The article shows that, based on an analysis of the Azerbaijani experience, the socially oriented economic policy pursued in the country — the increase of the minimum wage and pensions, targeted social assistance, and self-employment programmes — has made it possible to keep income inequality significantly below the global average. Thus, during the reporting period the Gini coefficient in Azerbaijan ranged between 0.266 and 0.289, while the poverty rate, being approximately 1.5–2 times lower than the global average (7.8%–10.8%), settled within the range of 4.8%–6.2%. The study emphasises that the inequitable distribution of incomes suppresses domestic demand, hampers the development of human capital, and poses a risk to socio-economic stability. In conclusion, in order to preserve inclusiveness and social welfare in Azerbaijan over the long term, stimulating the non-oil sector, reducing interregional development imbalances, and expanding investment in digitalisation and human capital have been identified as the principal priorities of state policy.

Keywords: İncome inequality, inclusive economic growth, Gini coefficient, the economy of Azerbaijan, poverty rate, GDP dynamics, institutional mechanisms, social protection, human capital, regional development.

INTRODUCTION

The quantitative growth of Gross Domestic Product (GDP), which for many years was accepted as the principal criterion of economic success, has in the contemporary era proved insufficient to ensure the real socio-economic welfare of societies. Notwithstanding the rise in the pace of economic growth, the concentration of the wealth generated in the hands of only a small group of the population deepens social injustice, threatens macroeconomic stability, and gives rise to structural crises in society. In this respect, against the backdrop of the digitalisation of the economy, the shifting trends of globalisation, and the new labour-market conditions brought about by the Fourth Industrial Revolution, the study of the dynamics of income inequality and its effects on inclusive development acquires particular relevance.

It is well known that, contrary to classical approaches, contemporary global trends show that economic growth does not regulate inequality of its own accord; on the contrary, in the absence of dedicated state intervention and institutional reforms, disparities become even more acute. High income inequality, by restricting the access of the lower and middle strata of society to quality education, modern healthcare, and financial resources, lowers the quality of human capital and deals a severe blow to the long-term competitiveness of countries. At the same time, the unequal distribution of incomes leads to a weakening of aggregate demand, for although low-income population groups have a high propensity to consume, their purchasing power contracts, which in turn slows the development of the domestic market.

The problem under examination also resonates directly with the Sustainable Development Goals (SDGs) of the United Nations, since the reduction of poverty, the safeguarding of gender equality, and the creation of decent working conditions for all depend precisely upon the construction of an inclusive economic model. The study of the problem prepares a scientific and practical basis for enhancing the effectiveness of the state\\\\'s fiscal-budgetary instruments, the progressive tax system, balanced regional development programmes, and social transfers. Consequently, this topic serves to identify the optimal balance between economic efficiency and social justice, to ensure that all members of society benefit equally from the fruits of economic growth, and to shape the long-term sustainable development strategy of the state.

The Dynamics and Main Trends of Income Inequality on a Global Scale

One of the most significant contradictions observed in the development of the global economy over the past decade is the discrepancy that has emerged between the rising pace of economic growth and the failure of income inequality to decline. Data from the World Bank, the International Monetary Fund, and the World Inequality Lab show that, although the volume of value added created in the world economy has grown steadily, the results of this growth are not distributed equally among population groups. As a result, the social efficiency of economic growth weakens, and ensuring inclusive development becomes all the more urgent [9, pp. 33–37]. One of the indicators most widely used in assessing global income inequality is the Gini coefficient. The statistics of the past ten years show that the global average Gini coefficient has continued to remain at a high level, with certain fluctuations. This situation indicates that structural problems in the distribution of incomes still persist.

Source: Compiled by the author on the basis of data from the State Statistical Committee of the Republic of Azerbaijan, the World Bank, and the World Inequality Database.

Diagram 1. Dynamics of the Global Average Gini Coefficient (2016–2025)

The analysis of Diagram 1 shows that in 2016–2025 the global average Gini coefficient remained high overall, confirming that income inequality continues to be one of the principal problems of the global economy. The indicator rose from 0.648 in 2016 to 0.662 in 2020, reaching its maximum; this increase may be associated with the deepening of disparities in the distribution of income and wealth during the pandemic period. Although a certain decline in the Gini coefficient was observed in the subsequent years, the fact that it remained at the level of 0.652 in 2025 indicates that inequality is still high. This dynamic once again brings to the fore the relevance of policy measures aimed at ensuring inclusive economic growth on a global scale, strengthening social protection mechanisms, and distributing incomes more equitably.

Assessment of the Impact of Income Inequality on Economic Growth, Poverty, and Social Welfare

In contemporary economic theory, income inequality is regarded as one of the most important socio-economic problems of economic development. The unequal distribution of incomes among the members of society is not merely a question of social justice; it is at the same time a factor that directly affects the sustainability of economic growth, the level of poverty, the formation of human capital, and overall social welfare. Studies conducted over recent decades show that high rates of economic growth are not always accompanied by an improvement in the welfare of the population. If the additional incomes generated as a result of economic growth are concentrated mainly in the high-income groups, then the social outcomes of economic development are limited and the principles of inclusive development are violated.

The results of the table show that the level of income inequality worldwide is significantly higher than in Azerbaijan. Whereas the global average Gini coefficient varied within the range of 0.646–0.662 in 2015–2024, in Azerbaijan this indicator ranged between 0.266 and 0.281. In particular, in 2020, as a result of the impact of the pandemic, inequality increased both at the global and at the national level: the Gini coefficient rose to 0.662 worldwide and to 0.281 in Azerbaijan. During this period, the decline in economic activity and the problems that arose in the labour market intensified the unequal distribution of incomes.

Table 1. Comparison of Income Inequality, Economic Growth, and Poverty Indicators in Azerbaijan and Worldwide (2015–2024)

Source: Compiled by the author on the basis of data from the State Statistical Committee of the Republic of Azerbaijan, the World Bank, and the World Inequality Database.

From the standpoint of social welfare, the impact of income inequality is of a broader character. The unequal distribution of incomes leads to a widening of the differences in living standards among the various groups of the population. These differences manifest themselves in access to education, healthcare, housing provision, social protection, and employment opportunities. In countries where the Human Development Index — considered one of the principal indicators of social welfare — is high, income inequality is usually observed to be at a lower level. Conversely, high income inequality intensifies social stratification and restricts social mobility.

Global experience shows that a high level of income inequality creates a risk to economic and social stability. The restriction of the consumption opportunities of the low-income segment of the population leads to a weakening of domestic demand. This, in turn, by restricting investment activity and the growth of production, weakens the sustainability of economic development. On the other hand, rising social discontent, inequality in the labour market, and interregional development disparities have a negative impact on the efficiency of the economic system.

The experience of Azerbaijan shows that the social protection programmes implemented by the state, the increase of the minimum wage and pensions, the improvement of the targeted social assistance system, and the expansion of employment make an important contribution to keeping income inequality under control. As a result of the implementation of a socially oriented economic policy in recent years, relative stability has been maintained in the distribution of incomes in the country. Alongside this, the development of the non-oil sector, the increase of economic activity in the regions, and the expansion of investment in human capital are considered to be the principal directions for ensuring inclusive economic growth in the future.

The Role of State Policy and Institutional Mechanisms in Ensuring Inclusive Economic Growth

Ensuring inclusive economic growth is regarded as one of the principal priorities of contemporary economic policy. This concept implies not only the reflection of economic growth in GDP indicators, but also the more equitable distribution of the incomes generated among the various social groups of society. The development trends observed in the world economy over the past decade show that high economic growth is not always accompanied by an improvement in social welfare. In a number of countries, although economic growth has accelerated, the problems of income inequality, poverty, and social stratification continue to persist.

According to the data of the World Bank and the United Nations, in 2015–2024 the global average Gini coefficient varied within the range of 0.646–0.667. This indicator shows that the unequal distribution of incomes on a global scale still remains a serious problem. Over the same period, average annual GDP growth in the world economy varied at approximately 2.5–3.5%. However, the results of this growth were not felt to the same degree by all population groups. In particular, in developing countries the widespread prevalence of informal employment in the labour market and the weakness of social protection systems have acted as one of the main obstacles to inclusive development.

The experience of Azerbaijan shows that, as a result of the socio-economic policy implemented by the state, income inequality has been kept at a lower level than the global average. In recent years, the increase of the minimum wage, the expansion of social benefits, the introduction of self-employment programmes, and the implementation of socio-economic development programmes for the regions have served to strengthen inclusive development. Statistical indicators also confirm this. Thus, whereas the Gini coefficient in Azerbaijan was 0.266 in 2015, in 2024 this indicator stood at 0.289. Worldwide, the corresponding indicator amounted to 0.646 and 0.667 respectively. This difference shows that Azerbaijan occupies a more favourable position than the global average in terms of income distribution.

For the sustainable preservation of the inclusive character of economic growth, the role of institutional mechanisms is of particular importance. Whereas in developed countries the share of social protection expenditure in GDP averages 20–30%, in Azerbaijan this indicator is lower. Nevertheless, as a result of a socially oriented state budget policy in recent years, the volume of social expenditure has increased significantly. In particular, the increase of wages, pensions, and social payments has had a positive effect on raising the incomes of the low-income strata of the population.

The analysis of the table shows that in 2015–2024 the poverty rate in Azerbaijan was approximately 1.5–2 times lower than the global average. At the same time, the fact that the Gini coefficient is also significantly lower than the global indicators shows that the social protection and income redistribution policy implemented by the state in the country has yielded certain results. In particular, although in 2020, during the pandemic period, an increase in poverty indicators was observed both in the world economy and in Azerbaijan, in the subsequent years the situation stabilised relatively as a result of social support packages and employment programmes.

Table 2. Comparative Analysis of Inclusive Economic Development Indicators in Azerbaijan and Worldwide (2015–2024)

Source: Compiled by the author on the basis of data from the State Statistical Committee of the Republic of Azerbaijan, the World Bank, and the World Inequality Database.

On the whole, the statistical analysis conducted shows that important results have been achieved in Azerbaijan towards ensuring inclusive economic growth. However, over the long term, the development of the non-oil sector, the increase of investment in human capital, the expansion of innovation and digitalisation, as well as the reduction of interregional development disparities, remain the principal priority directions of inclusive development policy. The strengthening of institutional mechanisms along these lines will be one of the main factors ensuring both the sustainability of economic growth and the improvement of social welfare in the future.

CONCLUSION

The statistical and theoretical analyses conducted in this article show that the quantitative indicators of economic growth (GDP growth) do not always fully reflect the real welfare of society and social justice. Notwithstanding the growth of GDP at the global level, the concentration of the value added generated in the high-income groups and the persistence of the global Gini coefficient at a high level (0.646–0.667) render the transition to an inclusive economic growth model inevitable. The unequal distribution of incomes restricts domestic demand and consumption opportunities, suppresses the access of the low-income stratum to quality education and healthcare, and consequently slows the development of human capital, which constitutes the core of the knowledge economy. In this respect, the regulatory role of the state and the establishment of effective institutional mechanisms are of decisive importance in ensuring socio-economic sustainability.

The comparative analysis of the Azerbaijani experience proves that the active social support packages applied in the country, the increase of the minimum wage and pensions, and the targeted social assistance and self-employment programmes have made it possible to keep income inequality significantly below the global indicators (within the range of 0.266–0.289). At the same time, the poverty rate in Azerbaijan (4.8%–6.2%) has been approximately twice as low as the global average, which is a positive result of the redistribution policy of the state. In conclusion, it should be noted that, in order to preserve the relative stability achieved over the long term and to strengthen inclusiveness, the development of the non-oil sector, the reduction of interregional economic imbalances, and the acceleration of innovation and digitalisation must remain the strategic priorities of state policy.

REFERENCES

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