The effects of gaps and disparities on economic growth : a study of 10 former socialist countries from the Central and Eastern Europe, members of the EU

The goal of this research paper is to empirically assess the potential effects of macroeconomic determinants of economic growth and to determine the impact of income inequality on economic growth in the long-run in ten former socialist countries from Central and Eastern Europe (CEE) which are members of the European Union (EU) during the period 2006-2014, using the System Generalized Method of Moments (GMM) as the research method. In order to achieve all the desired research objectives the following explanatory variables were used: income inequality (Gini Index), foreign direct investments (FDI), education, research and development expenditure, exports, population growth, labour productivity, tax rate, inflation rate and the Corruption Perception Index (CPI). The dependent variable employed in the empirical analysis, a proxy for the economic growth, is GDP per capita growth (annual %). The main finding of this paper’s investigations is that income inequality has a positive and statistically significant impact on economic growth and a 1% increase in the Gini coefficient enhances the GDP by 0.68% in the ten former socialist Central and Eastern European (CEE) countries which are members of the European Union (EU) during the period 2006-2014.