The Influence of Labor Market Determinants on Economic Inequality Measured by Gini Coefficient in Montenegro

Abstract

In this paper an analysis is conducted with the aim of a better understanding how the labour market and income inequality in society are connected, examining the relationships between the variables that describe economic inequality and the labour market in Montenegro. The analysis involves the use of econometric techniques and VAR models, which, with the use of impulse response functions and variance decomposition, best reflect the impact of selected labour market variables on economic inequality. The results of the analysis show that the variables of the labour market, namely the unemployment rate and the long-term unemployment rate, proved to be significant in explaining economic inequality, measured by the Gini coefficient. The results of the research can be useful to various researchers dealing with the issue of economic inequality in Montenegro, providing an additional mechanism for analyzing flows and predicting the future values of the determinants of economic inequality. The results also enable a different approach in the analysis of the labour market and the economic inequality in Montenegrin society, which can serve as a basis for many future analyses. Key words Gini coefficient; labour market; VAR models; inequality