Mihaela SIMIONESCU1,2
Abstract. Given the high inflation rate and income inequality in the post-pandemic period, the aim of this paper is to assess on empirical bases the effect of inflation rate on income inequality proxied by Gini index in Romania. The previous studies revealed mixed results related to the effect of inflation on income inequality, but empirical findings are necessary to design the best policies for each country. The inflation rate has significantly increased in the last few years in Romania, but its negative effects do not refer only to economic growth, financial system and foreign direct investment, but also to a social and economic issue like income inequalities. The results of this study based on autoregressive distributed lag (ARDL) models and ANOVA/linear Dependent Dirichlet Process (DDP) mixture model suggest that inflation reduced income inequality in Romania in the period 2000-2023. On the other hand, unemployment and poverty enhanced this issue, while more urban population reduced it in the long-run. The severity of unemployment is a key factor in managing the causal impact of inflation and poverty on Gini index. These empirical findings might help policy-makers to design better policies to tackle more interconnected economic issues to achieve the long-term objectives for sustainable development.
Keywords: inflation; income inequality; Gini index; unemployment; poverty
DOI 10.56082/annalsarscijkd.2025.1.19
1 University of Bucharest, 90 Șoseaua Panduri, 5th district, 050663, Bucharest, Romania
2 Academy of Romanian Scientists, 3 Ilfov Street, Bucharest, Romania. ORCID: 0000-0002-6124-2172
PUBLISHED in Journal of Knowledge Dynamics, Volume 2, No1