Abstract
Income inequality can possess a different impact on economic growth as it can both stimulate and slow down economic growth. The stimulating effect of income inequality reveals via saving. Wealthier people dispose the capability save more and devote a larger portion of their saving to investments and technological developments. However, environmental and social perspectives shall be also taken into consideration when aiming for a sustainable development. Therefore, relatively more wealthy people shall invest into environmental friendly projects and R&D. This paper considers the effects of income inequality on sustainable economic growth in the context of saving for the EU-25 countries during the period of 2005 – 2013. In the empirical research countries have been divided into 4 clusters. Impact of interaction between income inequality, savings, economic growth, spending on social security to domestic material consumption, renewable energy in gross final energy consumption, municipal waste generation, municipal waste recycling, ammonia and greenhouse gas emissions was estimated to be insignificant in all four country cluster groups. Interaction between income inequality, savings, economic growth, spending on social security was estimated to increase emission of sulfur dioxides and nitrogen oxides, but reduced amount of gross domestic energy consumption. The interaction is estimated to increase emission of nitrogen oxides in the country cluster groups with relatively low income level and different relationship between income and economic growth levels.DOI: http://dx.doi.org/10.5755/j01.ee.28.3.17438
Highlights
Increase of income inequality determines micro- and macro level social economic consequences
If wealthy social class considers environmental areas and redistribute their resources into investments and technological developments, increasing income inequality can lead to economic growth and improve environmental conditions
The third cluster is chosen in the assessment of reciprocal action among income inequality, saving, economic growth and spending on social security and the first nine variables of environmental area
Summary
Increase of income inequality determines micro- and macro level social economic consequences. Impact of sustainable economic growth is one of the consequences of increasing income inequality. Effects of income inequality on the sustainable economic growth can be measured by evaluating effects of income inequality on factors which affect economic growth, social and environmental areas. Effects of income inequality on economic growth are controversial meaning that income inequality effects can be both stimulating and slowing down the total economic growth. Stimulating influence appears via saving as increasing inequality leads to increasing saving of wealthy social class (increasing saving circumstances increasing investments). If wealthy social class considers environmental areas and redistribute their resources into investments and technological developments, increasing income inequality can lead to economic growth and improve environmental conditions. Even though income inequality can stimulate economic growth and improve environmental conditions, the poorest social class and spending on social security cannot be ignored
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