Empirical Evidence of the Macroeconomic Determinants of Income Inequality for Central and Eastern European Countries
Income inequality has become an inevitable topic in every country regardless of its level of economic development. However, the increase of wealth with the outpouring of globalization has put a particular emphasis on the income inequality, especially for countries that were characterized as transition economies. Thus, the purpose of this study is to investigate the economic determinants of income inequality of Central and Eastern European countries (CEEC). The research methodology consists of panel regression analysis based on Least Squares Dummy Variable (LSDV) model. By adding the dummy for each country, we are estimating the pure effect of economic indicators (by controlling for the unobserved heterogeneity) on Gini index. Each dummy is absorbing the effects particular to each country. The dataset covers an unbalanced panel of 18 countries. The empirical results reveal that income inequality of CEE countries primarily depends on main macroeconomic indicators such that GDP per capita, unemployment rate, and inflation as well as general government consumption expenditures, current account balance, real interest rate and the population growth rate.
Income inequality, economic determinants, LSDV, CEEC.
Cite this paper
Sadiku, M., Sadiku, L., & Berisha, N. (2023). Empirical evidence of the macroeconomic determinants of income inequality for Central and Eastern European countries. In: 23rd International Joint Conference Central and Eastern Europe in the Changing Business Environment: Proceedings. Vydavateľstvo EKONÓM, Bratislava. pp. 213-224. https://doi.org/10.18267/pr.2023.kre.2490.17