Abstract:
Income 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 of 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 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 significant variable. Hence, this study concludes that estimated factors affect the
income inequality of Sri Lanka. This study suggests that government must promote the policies
to reduce the income inequality and to increase the employment level and income, especially in
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.
