Abstract
This paper analyses the relationship between the following indicators: income inequality, gross domestic product, risk of poverty threshold and median equivalized net income for a panel of 28 countries of European Union (EU) over the period 2005-2016. Two theoretical regression models, a linear and a quadratic one, are used to estimate the influence on income inequality of the other three indicators. Empirical estimations, using panel data techniques on three different data panels, confirm the Kuznets hypothesis that income inequality tends to increase with early economic development and tends to decrease when a country reaches a certain level of development. We found that for emerging EU countries, income inequality has a growing tendency with a positive economic growth and maybe reduced by increasing risk of poverty threshold or median equivalized net income. For highly developed EU countries the situation is completely opposite. At EU level, the influence of gross domestic product on income inequality is strongly determined by its trend in the highly developed EU countries, while the influence of risk of poverty threshold and median equivalized net income on income inequality is strongly determined by their trend in the emerging EU countries.
Highlights
Globalization and new inventions have transformed the economy of the whole world, and especially of European countries, and economic growth has started to boom throughout the world, inequalities between the rich and the poor have deepened further
We find that at European Union (EU) level, the influence of gross domestic product on income inequality is strongly determined by its trend in the highly developed EU countries, while the influence of risk of poverty threshold and median equivalized net income on income inequality is strongly determined by their trend in the emerging EU countries
Using the quadratic model (2), we obtained for the EU28 panel the same influence of gross domestic product (GDP) on income inequality as for panel 1, while the influence of median equivalized net income (MENI) and risk of poverty threshold (RPT) on income inequality is the same as for panel 2
Summary
Globalization and new inventions have transformed the economy of the whole world, and especially of European countries, and economic growth has started to boom throughout the world, inequalities between the rich and the poor have deepened further. # The results in this paper were partially presented at the International Conference “Information Society and Sustainable Development” – ISSD 2018, 5th edition, April 27-28, 2018, Faculty of Economics, “Constantin Brancusi” University of Targu-Jiu, Romania. One of the major innovations of the Europe 2020 strategy for smart, sustainable and inclusive growth was to set a new common target in combating poverty and social exclusion, namely to reduce the number of Europeans living below the national poverty line by 25%. One of the initiatives was to develop a European platform against poverty and reduce the number of people suffering from or at risk of suffering from poverty and social exclusion by at least 20 million (European Commission, 2017)
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