ANALYZING THE EFFECT OF RULES OF LAW (RL) AND GDP ON INCOME INEQUALITY IN EUROPEAN COUNTRIES
ANALYZING THE EFFECT OF RULES OF LAW (RL) AND GDP ON INCOME INEQUALITY IN EUROPEAN COUNTRIES

Summary/Abstract: Income inequality is considered as one of the most concerning issues in the contemporary world, while regional disparities, unequal distribution of wealth, and ineffective economic policies lead this income-inequality to be higher on the daily basis. In this paper, the researchers try to find out the joint impact of Rules of Law (RL) and GDP on the level of income inequality (measured by Gini-coefficient value). The authors collected secondary data from the World Bank (WB) database for a period from 1995-2020. The authors use multiple regression model to measure the joint effect of (GDP*RL) on Gini-coefficient value. In this regression results, Life expectancy, GDP, Inflation and RL play negative role on income inequality. Conversely, population and political stability (PS) suggest a positive connection with income inequality. On the other hand, for integrated regression model, it is observed that the joint effect (GDP*RL) puts negative impact to reduce income inequality, with statistically significant value. Some European countries like Spain, Greece, Portugal, Lithuania and Latvia face great challenges on income inequality due to regional-disparities and fragile economic policies. Some countries do not have handy agricultural and industrial policies to reduce regional income-inequality. So, the economic policy makers should launch sustainable income opportunities, and effective agricultural and industrial polices, while welfare labor market could reduce income inequality in a significant behavior.

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