The Impact of Income Inequality on Economic Development: Case of Balkans Countries

Abstract

This thesis aims to discover the possible impact of Income Inequality in relation to other factors on Economic Development in nine Balkan countries, namely Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Greece, Kosovo, Montenegro, North Macedonia, and Serbia during the period 2012 to 2023, with a particular focus on economies in transition and development. The data used in this thesis has been collected from reliable sources. Utilizing a balanced panel dataset and applying the Random Effects Model, the research assesses the impact of four explanatory variables: Income Inequality (measured by Gini Index), Human Development Index (HDI), Financial Development (FD) and Foreign Direct Investment (FDI). The results indicate that Income Inequality, Human Development Index (HDI), Financial Development (FD) and Foreign Direct Investment (FDI) are statistically significant variables that have a negative impact on economic development in the Balkan countries during the period from 2012 to 2023. These results offer valuable insights for policymakers aiming to promote inclusive and sustainable economic growth. Specifically, they underscore the importance of reducing income inequality, enhancing financial systems, attracting productive FDI, and investing in human development as key strategies to foster economic development in the region.