Original scientific paper
https://doi.org/10.3935/rsp.v33i1.87
Investigating the Link Between Income Distribution and Growth Volatility: Panel Analysis of Selected Countries
Nemanja Popović
orcid.org/0009-0003-5686-9362
; Faculty of Economics, University of Monte Negro, Podgorica, Monte Negro
*
Milena Konatar
; Faculty of Economics, University of Monte Negro, Podgorica, Monte Negro
Jovan Đurašković
; Faculty of Economics, University of Monte Negro, Podgorica, Monte Negro
Milivoje Radović
; Faculty of Economics, University of Monte Negro, Podgorica, Monte Negro
* Corresponding author.
Abstract
This paper investigates the dynamic relationship between economic growth and income inequality, with a particular focus on how inequality levels shape countries’ resilience to crises. The central question is whether more equitable income distribution contributes to greater growth stability, especially during periods of financial turbulence. To address this, we estimate panel VECM models for 26 European and Asian countries over the period 1995–2022. The results indicate that countries with more equal income distributions did not experience more stable growth rates during crises, as confirmed by dynamic modeling and the Chow breakpoint test. Furthermore, the financial crisis shock was not observed in high-inequality countries, whereas it was present in lower-inequality countries. This outcome is linked to structural features, particularly the strength of the industrial base and domestic demand, which act as buffers against external shocks.
Keywords
Economic growth; income inequality; panel data; 2008 financial crisis
Hrčak ID:
349550
URI
Publication date:
2.7.2026.
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