Abstract

This paper examines the impact of the various components of human capital on income inequality, and poverty in Islamic countries. The least-squares estimation technique in a multivariate linear regression was used. It must be pointed out that the inclusion of interaction terms between income and the components of human capital, yields better statistical results, as expected. Data for all variables are from the World Development Report (2008, 2009) and from Annual Economic Report on the OIC countries. Using a sample of 45 Islamic economies, the results indicate that enhancing the components of human capital in the Muslim world, will reduce poverty and change income distribution toward equality. The results of the empirical investigation will help governments in Islamic countries to identify the areas that must be improved in order to reduce poverty and alleviate the gap between the rich and the poor. This paper is first of its kind providing useful information on the impact of the human capital components on poverty and income distribution in Muslim world.

Key words: Human capital, poverty, income inequality, education, health, Islamic countries.