INCOME INEQUALITY AND ECONOMIC GROWTH AT THE EUROPEAN UNION

Economic growth has several determinants, however, there is little research on the effect of income inequality on economic growth. In the case of the European Union, there are countries with different varieties of capitalism, which leads a significant variation in the levels of inequality between countries. The paper aims to estimate the effect of income inequality on the economic growth of the Member States of the European Union, considering different types of income inequality: Gini index, top 1% share and top 10% share. We used a dynamic and static panel that models which measure the effect of inequality on the economic growth of the Member States of the European Union. The results show that the type of inequality variable affects the relationship between the income inequality and economic growth, in addition to the fact that the indicators that measure income inequality have a negative and positive impact on the economic growth on the Member States of the European Union