Abstract:
ncome inequality is one of the major concern in the Sri Lankan economy for the last three decades. This
research aims to identify the impact of macroeconomic, demographic and political economy factors on
income inequality over the period time 1990 to 2017. This research has used secondary data and analyzed
by using Ordinary Least Square Model (OLS). According to the results, this study concludes that GDP per
capita, CPI, education expenditure, inflation and manufacture have a positive and significant impact while
unemployment has a negative impact on income inequality in Sri Lanka. Although labour force negatively
related to income inequality and it is not a significant variable. Hence, this study concludes that estimated
factors affect the income inequality of Sri Lanka. This study suggests that the government must promote
policies to reduce income inequality and to increase the employment level and income, especially in the
agriculture sector. And also, Policymakers should focus on promoting the monetary policy and allocating
recourse efficiently for the sustainable growth of the country to reduce income inequality.
