DOES ECONOMIC INEQUALITY BOOSTS ECONOMIC GROWTH: EVIDENCE FROM THE REPUBLIC OF SRPSKA

Abstract

In this paper we will present the results of our survey on economic inequality, and its impact on economic growth in the Republic of Srpska. Here, we will express inequality as unequal distribution of the results and conditions of economic activity. To measure economic inequality we will use Theil's T index. Our basic assumption is  that unequal distribution of the results and conditions of economic activity, all in favor of the real sector of the economy, will lead to the real GDP growth. We find that unequal distribution of the results of the economic activity have positive impact on GDP growth, and that unequal distribution of the conditions of economic activity has negative impact on GDP growth. Our results shows that the economy of the Republic of Srpska is full of anomalies.