Gini's Odyssey in Greece: Econometric analysis of income in-equality, GDP, and unemployment, through economic phases (pre crisis, crisis, memoranda and post memoranda)

This study investigates the relationship between income inequality, economic growth, and unemployment in Greece over the period 2003–2020, encompassing distinct economic phases: pre-crisis (2003–2008), crisis and memoranda (2009–2014), and post-memoranda (2015–2020). The research focuses on two primary hypotheses:

H1: There is a positive relationship between GDP (measured logarithmically as LOGGDP) and income inequality (Gini coefficient), suggesting that economic growth, when not accompanied by redistributive mechanisms, exacerbates income disparities.

H2: There is a positive relationship between unemployment and income inequality, reflecting the disproportionate impact of labor market disruptions on lower-income groups.
Description of the Data

The analysis uses annual data for Greece over 18 years (2003–2020). The variables analyzed include:

Dependent Variable:
Gini Coefficient: A measure of income inequality where 0 represents perfect equality and 1 represents maximum inequality.

Independent Variables:
LOGGDP: The natural logarithm of Gross Domestic Product (GDP), reflecting economic output while accounting for non-linear effects of growth.
Unemployment Rate (% of total labor force): Represents the share of the labor force actively seeking employment but unable to find work.

Data Sources and Collection

Gini Coefficient: Extracted from World Bank Open Data, calculated using annual household income surveys.
GDP: Sourced from the World Bank and measured in constant US dollars to adjust for inflation and ensure comparability over time.
Unemployment Rate: Sourced from the World Bank
Analytical Methods

Correlation Analysis:
Pearson correlation coefficients were calculated to explore the strength and direction of relationships between variables.

Linear Regression Model:
The model estimated the impact of LOGGDP and unemployment on the Gini coefficient:
Ginit=α+β1LOGGDPt+β2Unemploymentt+ϵt
Ginit​=α+β1​LOGGDPt​+β2​Unemploymentt​+ϵt​
α: Intercept.
β1 and β2: Coefficients for LOGGDP and unemployment, respectively, representing their influence on the Gini coefficient.
ε: Error term.

Diagnostic Tests:
Multicollinearity was assessed using Variance Inflation Factors (VIF).
Model robustness was checked with Durbin-Watson statistics to evaluate autocorrelation.
Residual analysis ensured compliance with normality assumptions.
Hypothesis Validation

Economic Growth and Inequality (H1):
The positive relationship between LOGGDP and the Gini coefficient underscores that growth during the analyzed periods did not equitably benefit all segments of society.

Unemployment and Inequality (H2):
The stronger positive effect of unemployment on inequality highlights the critical role of labor market disruptions in intensifying disparities.