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group consisted of economic growth-related variables – GNI, PPP (current international $) and

general government final consumption expenditure (% of GDP). The second group involved

an economically-related variable – total unemployment (% of total labor force). The last

group consisted of good governance-related variables – government effectiveness, rule of law,

and regulatory quality. The test results suggested that the model should be tested using the

random effect method, and the findings were in line with assumptions of this research. That

is, the rule of law (b = 0.535) and general government final consumption expenditure (% of

GDP) (b = -0.0262) had influence on the income share held by lowest 10% of the population

at the statistically significant level of .05.

The key findings of this study included: 1) The wealthier countries are, the higher their

expenditure will be, but their income inequality situations will be worse – An emphasis should

be placed on the target population rather than a huge amount of expenditure; 2 )

Unemployment influences income inequality – The government should provide guidelines for

achieving the highest rate of employment; and 3) The rule of law is a supporting factor in

reducing income inequality, especially for the lowest 10% of the population.

Key Words : Income Inequality, Income Share Held by Lowest 1 0 % , Panel Data Analysis,

Unemployment Rate, Public Expenditure, GNI, Rule of Law