CAN INCOME INEQUALITY BE REDUCED THROUGH ECONOMIC DEVELOPMENT AND EDUCATION? AN EU-27 PANEL ANALYSIS

Abstract

The paper’s main objective was to explore the determinant factors of income inequality in the European Union using panel data regression model with data ranging from 2000 to 2019. The study observed that education plays an important role in reducing the value of Gini indicator, a measuring index for income inequality. If the countries` focus would be on increasing the level of education, equal opportunities for all children, both urban and rural and access to resources that allow them to complete the primary and secondary cycle, then we can talk about a halving of Gini, implicitly a substantial reduction of the income inequality gap. This study also agrees with the current belief that urbanization and openness to foreign trade lead to a decrease in the value of the indicator, but not as significant as education. Furthermore, the relationship between Gini and unemployment is positive. A degradation in the unemployment structure contributes to increasing inequality. The income gap is more visible in emerging economies, where the policies are not carefully implemented among the citizens.

Keywords

• income inequality
• european union economies
• panel data
• gini