What Triggers Income Inequality? A Case of Countries with High HDI

This paper explores the issue of income inequality and reveals its determinants basing on the sample of 51 countries with the highest Human Development Index. In final regression 37 countries were used, because of missing recording in many observations. Time horizon chosen initially is 1980 – 2014, but due to lack of data, it was decided to shorten time period to 1995-2014. Overall, panel data contained 740 observations. Dependent variable is a Gini index in a country calculated on the basis of disposable income of households. Among factors, including in regression were GDP per capita, unemployment, population density, political variables, development of financial sector, trade openness, technological change, effects of global financial crisis 2008 and Asian crisis 1997-1998 education and health care levels. To use such variables as technological change or medical care proxies were used. To consider potential problem of endogeneity instrumental variable technique was used. Some hypotheses were supported empirically at 1% level or at 5% as were predicted, however, there were unexpected results such as education level unimportance, the opposite effect of financial sector and the effects of technological change.