IMPACT OF INCOME INEQUALITY ON ECONOMIC GROWTH CASE STUDY OF 27 EU MEMBER STATES
Erblina HAJDARI, Sevdie ALSHIQI - BEKTESHI
Abstract
Income inequality is an essential factor in economic development, as it significantly affects the rate and sustainability of a country's economic growth. This research aims to examine the impact of independent variables (Gini coefficient, trade openness, unemployment rate, domestic credit to the private sector, and general government expenditure) on economic growth in 27 EU member states over the period 2008-2019. The study was based on secondary data, which were mainly obtained from the World Bank. The data used in the research are Panel data and include 324 observations. Due to the use of panel data, various kinds of econometric models have been implemented in this research. The analysis began with the OLS model, but due to the unbalanced panel, the fixed effects (FE) and random effects (RE) models were also used. According to the econometric model results, trade openness has a positive impact on economic growth. In contrast, income inequality, the unemployment rate, domestic credit to the private sector, and government consumption expenditure negatively affect economic growth.
Pages: 61 - 69