Examining the Impact of Entrepreneurship on Income Distribution Inequality in Selected South Asian Countries (2003–2023)

Abstract

Income inequality is considered one of the major challenges to sustainable development in developing countries. This study aims to examine the impact of entrepreneurship on income distribution inequality in selected South Asian countries, namely India, Bangladesh, and Pakistan, over the period 2003–2023. The data are collected from reliable international sources, including the World Bank, the Global Entrepreneurship Monitor (GEM), and the United Nations Human Development Reports. For empirical analysis, panel data techniques and a nonlinear regression model with economic and institutional control variables are employed. To address endogeneity and the dynamic nature of the relationships, the Generalized Method of Moments (GMM) is applied. The entrepreneurship index is decomposed into necessity-driven and opportunity-driven entrepreneurship in order to capture the qualitative dimension of entrepreneurial activities. The results indicate that entrepreneurship has a statistically significant and inequality-reducing effect on income distribution. Moreover, opportunity-driven entrepreneurship plays a more prominent role in improving income equality compared to necessity-driven entrepreneurship. The findings also confirm the existence of a stable long-run relationship among the variables of the model. These results highlight the importance of policy attention to the quality of entrepreneurship, strengthening the institutional environment, and providing targeted support for productive and opportunity-driven entrepreneurial activities as effective instruments for reducing inequality and promoting inclusive growth in the South Asian region.