Income Distribution, Inequality and Poverty: Evidence, Explanations and Policies

Author: Clementi, Fabio

Publisher: Basel: MDPI - Multidisciplinary Digital Publishing Institute

Year: 2024

DOI: 10.3390/books978-3-7258-2442-7

Source: https://www.econstor.eu/bitstream/10419/321945/1/MDPI_9783725824427.pdf

Clemen i, Fabio (Ed.)
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Income Dis ibu ion, Inequali y and Po e y: E idence,
Explana ions and Policies
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Special Issue Rep in
Income Dis ibu ion,
Inequali y and Po e y
E idence, Explana ions and Policies
Edi ed by
Fabio Clemen i
Income Dis ibu ion, Inequali y and
Po e y: E idence, Explana ions and
Policies
Income Dis ibu ion, Inequali y and
Po e y: E idence, Explana ions and
Policies
Edi o
Fabio Clemen i
Basel •Beijing •Wuhan •Ba celona •Belg ade •No i Sad •Cluj •Manches e

Edi o
Fabio Clemen i
Uni e si y o Mace a a
Mace a a
I aly
Edi o ial O ﬁce
MDPI AG
G osspe e anlage 5
4052 Basel, Swi ze land
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Con en s
Abou he Edi o .............................................. ii
Fabio Clemen i
Income Dis ibu ion, Inequali y and Po e y: E idence, Explana ions and Policies
Rep in ed om: Economies 2024,12, 276, doi:10.3390/economies12100276 .............. 1
Jib an Hussain, Saeed Siyal, Riaz Ahmad, Qaise Abbas, Yu Yi ian and Liu Jin
Impac o Ene gy C ises on Income Inequali y: An Applica ion o Pike y’s Hypo hesis o
Pakis an
Rep in ed om: Economies 2024,12, 259, doi:10.3390/economies12100259 .............. 5
Molepa Seabela, Kanayo Ogujiuba and Ma ia Eggink
De e minan s o Income Inequali y in Sou h A ica: A Vec o E o Co ec ion Model App oach
Rep in ed om: Economies 2024,12, 169, doi:10.3390/economies12070169 .............. 28
Knu Leh e Seip and F ode Eika Sandnes
The Timing and S eng h o Inequali y Conce ns in he UK Public Deba e: Google T ends,
Elec ions and he Mac oeconomy
Rep in ed om: Economies 2024,12, 135, doi:10.3390/economies12060135 .............. 45
Enzo Valen ini
Pa e ns o In e gene a ional Educa ional (Im)Mobili y
Rep in ed om: Economies 2024,12, 126, doi:10.3390/economies12060126 .............. 62
Elisabe a C oci Angelini, F ancesco Fa ina and Sil ia So ana
The Impac o he G ea Recession on Well-Being ac oss Eu ope Ten Yea s On: A Clus e
Analysis
Rep in ed om: Economies 2024,12, 115, doi:10.3390/economies12050115 .............. 75
Ad iana AnaMa ia Da idescu, Oana-Ramona Lobon ¸ and Tama a Ma ia Nae
The Fab ic o T ansi ion: Un a eling he Wea e o Labo Dynamics, Economic S uc u es, and
Inno a ion on Income Dispa i ies in Cen al and Eas e n Eu ope Na ions
Rep in ed om: Economies 2024,12, 68, doi:10.3390/economies12030068 .............. 92
Ad iana AnaMa ia Da idescu, Tama a Ma ia Nae and Ma ga e a-S ela Flo escu
F om Policy o Impac : Ad ancing Economic De elopmen and Tackling Social Inequi ies in
Cen al and Eas e n Eu ope
Rep in ed om: Economies 2024,12, 28, doi:10.3390/economies12020028 ..............105
Lidia de Cas o Rome o, V´ıc o Ma ´ın Ba oso and Rosa San e o-S´anchez
Does Gende Equali y in Manage ial Posi ions Imp o e he Gende Wage Gap? Compa a i e
E idence om Eu ope
Rep in ed om: Economies 2023,11, 301, doi:10.3390/economies11120301 ..............130
Michele Fabiani
Un a eling he Roo s o Income Pola iza ion in Eu ope: A Di ided Con inen
Rep in ed om: Economies 2023,11, 217, doi:10.3390/economies11080217 ..............153
Ja le Aa s ad and Ola And eas K i as ein
Wage Inequali y’s Dec easing E ec on En e p ise Ope a ing Re enues
Rep in ed om: Economies 2023,11, 178, doi:10.3390/economies11070178 ..............171
Geo ge Pe akos, Kons an inos Ron os, Cha a Va ou a and Ioannis Va ou as
The Impac o Recen Economic C ises on Income Inequali y and he Risk o Po e y in G eece
Rep in ed om: Economies 2023,11, 166, doi:10.3390/economies11060166 ..............179
i
Abou he Edi o
Fabio Clemen i
Fabio Clemen i, Ph.D., is a P o esso o Economics a he Uni e si y o Mace a a (I aly). His
main esea ch in e es s ocus on he size dis ibu ion o income, weal h and ﬁ ms, business cycle
analysis, and he empi ical alida ion o agen -based economic models wi h eal-wo ld da a. He
has published se e al pape s in pee - e iewed in e na ional jou nals and book chap e s on opics
ela ed o his scien iﬁc ac i i y and se es as a e e ee o a ious in e na ional jou nals. He has
also been in ol ed in a numbe o na ional and in e na ional esea ch p ojec s aligned wi h his a eas
o expe ise. He has p esen ed communica ions a many in e na ional mee ings, also as an in i ed
speake , and has con ibu ed as a membe o he scien iﬁc and/o o ganizing commi ee o some
in e na ional con e ences. Mos ecen ly, he has ac ed as a consul an o he Wo ld Bank on ma e s
ela ed o income dis ibu ion and inequali y.
ii
Economies 2024,12, 259
o o li ing he lowe and middle classes. This ongoing issue o esou ce dis ibu ion and
i s his o ical oo s needs in-dep h in es iga ion. Mo eo e , he poli ical s abili y c isis was
i al in con ibu ing o income inequali y, as well as he ene gy c isis, du ing his pe iod.
The poli ical clima e was no s abilized h ough any ema kable o no able ins i u ional
capaci y-building p og ams in he yea s 2000 o 2007; a he , ad hoc adjus men policies
con inued o be en o ced as a popula me hod o unning s a e a ai s. The ene gy ab ic
and sys em collapsed du ing he ecession, led by he ene gy c isis in 2007, and he e was
no much ha poli ical and economic ins i u ions could o e o socie y (Zaidi 2015).
The coun y is s ill s uggling wi h he a e ma h o he policy-incapaci a ed ou comes
o he pas . As a esul , inequali y kep g adually inc easing; he sha e o o al income
o he poo es 20 pe cen dec eased du ing he pe iod om 1997 o 2021, while he sha e
o he weal hies 20 pe cen inc eased. The sha e o he poo es 20 pe cen inc eased
sligh ly du ing he 1980s. Howe e , hei sha e s a ed o decline again in he 1990s and
eached 6.37 pe cen by 2004. On he o he hand, he sha e o he weal hies 20 pe cen
inc eased du ing he pe iod om 1997 o 2021 and eached 50.02 pe cen in he pe iod om
2009 o 2010 (Wo ld Bank G oup 2014). Al hough he a e age income le el in Pakis an
is sligh ly inc easing, along wi h economic g ow h o almos 5 pe cen , he gap be ween
socioeconomic classes has no imp o ed signiﬁcan ly. In his con ex , his a icle examines
he ac o s beyond income le els ha shape equali y in socie y, wi h a special ocus on
he a ailabili y and a o dabili y o ene gy esou ces. This a icle shows ha he e a e
ac o s o he han income le els and economic g ow h ha ha e signiﬁcan oles in shaping
equali y in socie y. Two o hese c i ical ac o s a e a o dable ene gy se ices and access o
ene gy esou ces. The g owing and c eeping c isis in he ene gy sec o o e he yea s, as a
esul o pe sis en poli ical unce ain y in he coun y, has been dec easing he capaci y o
he masses o access ene gy esou ces; o Mu aza and Fa idi (2015), i has inc eased ene gy
po e y, which eﬂec s he pe sis ency o he lack o ene gy supplies and he inabili y o he
masses o access esou ces. A he same ime, he limi ed a ailabili y o ene gy supplies
and se ices has been educing he eal income o he masses o e he yea s.
Acco ding o Cheema and Sial (2012), his inc easing income inequali y despi e inc eas-
ing economic g ow h a es is due o he un ai dis ibu ion o esou ces among p o inces
and he biased dis ibu ion be ween u al and u ban a eas. In he case o u al–u ban
pola iza ion, a simila conclusion was eached by Awan e al. (2013), in ha he abili y
o access ene gy se ices in u al a eas is ela i ely lowe han in u ban a eas. Mo eo e ,
Haq and Shi azi (1998) concluded ha , in e ms o non ood expendi u e, economic wel-
a e le els in u al a eas a e compa able o hose o he u ban sec o , and hey p oposed
ha policies should be di ec ed owa d enhancing he expendi u e capaci y o he poo -
es g oups. Nwosu e al. (2018) showed ha non ood expendi u e is a majo sou ce o
inequali y in household consump ion expendi u es in bo h u ban and u al a eas and
ha a iables such as li ing in u al a eas, household size, ype o household dwelling,
and household dwelling cha ac e is ics accoun o signiﬁcan p opo ions o inequali y
in ood and non ood expendi u es. Mu aza and Fa idi (2015) blamed income pola iza-
ion o expanding income po e y and ene gy po e y, which eﬂec s he dec easing
consump ion expendi u es.
Pakis an is among he weakes coun ies in he wo ld in e ms o he Sus ainable
Ene gy De elopmen Index (SEDI), he Human De elopmen Index (HDI), and he Ene gy
Po e y Index (EPI) es ed globally. This implies ha he a e age household in Pakis an
has o spend a la ge po ion o i s income o acqui e ene gy supplies and se ices e e y
ime he e is an ene gy c isis o oil p ices inc ease. As o e -dependency on ex e nal ene gy
supplies shi s weal h om he local economy o he o eign, lea ing less o he locals,
he g ow h in household ﬁnal consump ion expendi u e has dec eased o e he yea s in
he coun y (Idd isu and Bha acha yya 2015). Kuzne s (1955) con ibu ed o he issue o
income and esou ce dis ibu ion by empi ically analyzing income inequali y. He belie ed
ha coun ies ace se ious inequali y issues when he economy is in he ‘ ake-o ’ s age
6

Economies 2024,12, 259
and mo ing owa d indus ializa ion; howe e , he issue o inequali y s abilizes a e he
achie emen o he s eady-s a e le el.
Pike y (2014), on he o he hand, di ed in o he weal h and ax da a o F ance,
Ge many, Japan, he Uni ed Kingdom, and he USA, om 1810 o 2010, o s udy he esou ce
dis ibu ions and income inequali ies in hese coun ies. He belie es ha he concep o
inequali y in he ﬁeld o economics is insu ﬁcien , especially while using he ela ionship
be ween he economic g ow h a e and income sha es. He expands his de ailed discussion
and p oposes ha , i he a e o e u n om capi al ( ) exceeds he g ow h a e o he
economy (g) o e a s eady pe iod, i gi es ise o he p oblem o income inequali y (Pike y
2015). Despi e expanding he c i ique on his heo y o income inequali y, he p oposes ha ,
in addi ion o he >ghypo hesis o explaining income inequali y, ins i u ional changes
and poli ical shocks emain as in eg al and indigenous pa s o his income inequali y
unc ion (Pike y 2015). The ex ension o Pike y’s hypo hesis p esen s a alid ﬁ in he
case o Pakis an, whe e poli ical ins abili y o e he yea s has been esponsible o his
educ ion in ins i u ional capaci ies; as a esul , despi e inc easing g ow h a es and income
le els, income inequali y is on he ise, especially a e he 1990s. Lakne (2016) no ed ha
he c ucial aspec s o measu e Pike y’s (2014) ha make i mo e ele an and app op ia e
a e as ollows: Fi s , i does no unde es ima e he incomes and expendi u es o weal hy
households, as A kinson e al. (2011) ea ed ha mos o he household su eys do a poo
job cap u ing he incomes and consump ions o he iches . Second, i cap u es he capi al
incomes and p oﬁ s o he en ep eneu ial p ocess, which household su eys in de eloping
coun ies ail o inco po a e (Al a edo and Gaspa ini 2015). Thi d, consump ion su eys, in
use p ima ily in unde de eloped and de eloping coun ies, end o unde mine he ac ual
pic u e o he li ing s anda ds o he weal hy class, who end o sa e mo e han he bo om
ac ions o a socie y (Aguia and Bils 2015). Only 40 pe cen o he o al popula ion o
Pakis an has access o clean uel and echnologies o cooking, and his is biased owa d
u ban a eas, whe e almos 98 pe cen o consume s ha e access o elec ici y, whe eas
only 90 pe cen o consume s in u al a eas ha e he same access (Wo ld Bank 2018). The
access, a ailabili y, and a o dabili y o ene gy supplies, se ices, and echnologies ha e
wide dispa i ies be ween he u ban and u al, ich and poo , and ha es and ha e-no s
in Pakis an. This inc easing inequali y in ene gy esou ce dis ibu ion, ene gy supply
dispa i ies (Mahmood and Shah 2017), and income and ene gy po e y (Mu aza and
Fa idi 2015) in he p esence o a pe sis en , uns able poli ical sys em is causing inc easing
income inequali y in Pakis an (Shehzadi e al. 2019).
The exis ing li e a u e p o ides a ounda ion o unde s anding he ela ionship be-
ween ene gy access and income inequali y. S udies ha e shown ha unequal access
o ene gy can exace ba e income dispa i ies (Bazilian and Yumkella 2015; Bouza o ski
and He e o 2017). In Pakis an, ene gy po e y has been iden iﬁed as a signiﬁcan is-
sue a ec ing low-income households (Mahmood and Shah 2017). This s udy builds on
hese ﬁndings by applying Pike y’s hypo hesis o esou ce dis ibu ion o he con ex o
Pakis an’s ene gy c isis.
The Kuzne s cu e has been a popula benchma k o unde s anding he ela ionship
be ween economic g ow h and income inequali y. This popula i y was pa icula ly no able
du ing he mid-20 h cen u y.
Acemoglu and Robinson (2013) p o ide a deepe insigh in o si ua ions in which he e
is an abundance o ene gy bu high inequali y. Thei wo k sugges s ha inclusi e poli ical
ins i u ions a e necessa y o ensu e equi able esou ce dis ibu ion.
A kinson’s con ibu ions, pa icula ly his p e ious esea ch, ha e simila conclusions
abou he ela ionship be ween inequali y and esou ce dis ibu ion. This highligh s he
need o equi able ene gy policies.
Pike y’s explana ion o he co ela ions be ween esou ce dis ibu ion, g ow h, and
income inequali y sugges s ha unequal esou ce dis ibu ion leads o inc eased inequali y.
Resou ce dis ibu ion, in his con ex , includes access o ene gy, which is essen ial o
economic g ow h and educing inequali y. G unewald e al. (2014) imply ha a educ ion
7
Economies 2024,12, 259
in CO
2
emissions, ene gy usage, o ene gy supply inc eases he di e ence be ween ene gy
supply and demand, causing ene gy c ises. Shahbaz (2010) es ed Kuzne s’ heo y in he
con ex o ene gy and income inequali y in Pakis an. The measu e o income inequali y
used in hese s udies di e s om Pike y’s -g model. (See Figu e 1)
Income Ine
q
uali
y
A
pp
lica ion o Pik e
yy
s Model
Figu e 1. Applica ion o Pike y’s hypo hesis on income inequali y, 1997–2021.
A compa ison o u al and u ban a eas shows ha 93 pe cen o he u ban popula ion
compa ed o 63 pe cen o he u al popula ion in Pakis an ha e access o elec ici y
(Mahmood and Shah 2017). The mise y o he ene gy dispa i y and dep i a ion eached an
ala ming si ua ion, wi h 19 pe cen o he u ban and 71 pe cen o he u al popula ions no
being able o a o d ene gy se ices o supplies. Despi e inc easing a e age income le els
in Pakis an, along wi h an a e age economic g ow h a e o almos ﬁ e pe cen , household
consump ion expendi u e is dec easing and income inequali y is ba ely imp o ing (Awan
e al. 2013). I is e iden , om he ac ha , despi e an inc easing pe capi a income,
he Gini coe ﬁcien inc eased om 30 in 1997 o 37 in 2021, and household consump ion
expendi u e is showing a dec easing end (Wo ld Bank 2022). The impac o he ene gy
c isis on he u al poo is signiﬁcan ly mo e se e e han ha on he u ban masses, and
he unde p i ileged and he poo a e spending a mo e signiﬁcan sha e o hei incomes
on ene gy supplies. The ene gy c isis is con ibu ing o agg a a ed income inequali y by
widening he gap be ween he ha es and he ha e-no s in he coun y, and hampe ing
he abili y o masses o ha e access o ene gy se ices and supplies, by educing he eal
income o he lowe classes, and hus hei capaci y o li e.
This pape makes a signiﬁcan con ibu ion by linking his o ical and con empo a y
issues o esou ce dis ibu ion in Pakis an wi h income inequali y, pa icula ly h ough he
lens o he ene gy c isis. By examining he impac o policies like he Indus ial Policy (1948)
and he G een Re olu ion (1959), and hei ole in os e ing socioeconomic dispa i ies, he
pape highligh s how his o ical decisions ha e pe pe ua ed income inequali y and ene gy
po e y. I builds on he exis ing li e a u e by applying Pike y’s hypo hesis on esou ce
dis ibu ion and income inequali y o Pakis an’s con ex , demons a ing ha despi e eco-
nomic g ow h, he unequal dis ibu ion o ene gy esou ces exace ba es socioeconomic
di ides. This s udy unde sco es ha beyond income le els and economic g ow h, access
o a o dable ene gy se ices is c ucial in shaping socie al equali y. By in eg a ing a ious
heo e ical pe spec i es, including Kuzne s’ cu e and Pike y’s -g model, wi h empi ical
da a on ene gy access and income inequali y, he pape o e s a nuanced analysis o how
8
Economies 2024,12, 259
pe sis en ene gy c ises and poli ical ins abili y con ibu e o wo sening income inequali y
in Pakis an.
The es o his pape is as ollows: Sec ion 2 con ains he li e a u e e iew; Sec ion 3
co e s me hodology; and Sec ion 4 co e s da a analysis ollowed by conclusions and
ecommenda ions o u u e di ec ions.
2. Li e a u e Re iew
Income inequali y is one o he mos deba ed opics in he li e a u e on socioeconomic
wel a e. The heo y o income inequali y eﬂec s he undamen al issues o esou ce dis i-
bu ion and sha e, and he access o di e en ac ions o socie y o na ional and collec i e
esou ces. In e e y e a, p ominen esea che s ha e p esen ed hei heo ies on income
inequali y, such as Smi h (1776) who p o ided an essen ial and signiﬁcan ounda ional
unde s anding o income inequali y h ough he concep o esou ce dis ibu ion be ween
he labo e s, he capi alis s, and he landowne s. He heo ized ha he landowne be-
comes iche wi h he g ow h o ee ma ke s and socie y as an consequence o he labo e s
ha d wo k, his is he ounda ion o inequali y in e ms o esou ce dis ibu ion and he
exploi a ion o he labo ing class. The ounda ional wo k o Smi h pa ed he way o
Ma x (1818–1883) o p opose his amous heo y o socioeconomic inequali ies. He s a ed
ha he capi alis exploi a ion o esou ces is esponsible o pola izing socie y and mo-
i a es he masses owa d e olu ion as a o m o class s uggle. His hesis p omised
equali y and jus ice in socie y and cu ed he issue o inequali y wi h he p e alence o a
dominan socialis socie y. On he con a y, Skocpol (1977) belie ed in he undamen al
o ces o ma ke s abiliza ion as a solu ion o he pola i ies in esou ce dis ibu ion and
p e ailing income inequali ies. Whe ein, Polinsky (1974) also conceded he possibili y o
ai dis ibu ion o esou ces h ough a heo y o equi y in ac o s o p oduc ion. On he
o he hand,
Keynes (1973)
po ayed a pessimis ic iew o he consequences o income
inequali y and cau ioned abou he mo e signiﬁcan damage ha inequali y could b ing
o socie y and he economy. Ene gy supply is a c ucial ac o o social de elopmen and
g ow h, as well as ad ancemen s and ans o ma ions owa d mode niza ion. Limi ing
he supply o ene gy would c ea e a c isis in socie ies. The sus ainable ﬂow o ene gy and
ene gy use is undamen al o indus ial economies and social o ganiza ions. The e o e,
ene gy dep i a ion is a ‘ h ea mul iplie ’ and ‘ h ea ins iga o ’ in mili a y pa lance; ye ,
un o una ely, i ook se e al yea s o he in e na ional communi y and o ganiza ions o
acknowledge he impo ance o ene gy sus ainabili y and secu i y. This ene gy dep i a-
ion is conside ed o be a clea ca alys o un es , ins abili y, you h unemploymen , and
u baniza ion in socie ies.
Income inequali y is an essen ial de e minan o socioeconomic wel a e, a i al heo e -
ical a ai o policymake s and economis s. I eaches esou ce economics wi h he hope o
de e mining he edis ibu ion o sca ce esou ces in a way ha could educe inequali ies
in socie y. The heo y o inequali y by Kuzne (1955) emains a popula benchma k o
measu e he le el o wel a e h ough income dis ibu ion among di e en income ac-
ions in socie y. No wi hs anding he popula i y o Kuzne s’s hesis, he applica ion o
his measu e o income inequali y o de eloping coun ies aises alid and con adic ing
ques ions; mos such objec ions a e deba able, ye much is le unexplained by his heo y,
such as cases in which u baniza ion, indus ializa ion, inc easing imp o emen s in ene gy
esou ces and economic g ow h occu side by side along wi h inc easing income inequali y,
such as in Russia (Lyubimo 2017). Simila ly, Acemoglu and Robinson (2013) explained
he esou ce ichness (ene gy) o coun ies (such as Nige ia and Middle Eas e n coun ies)
expe iencing inc easing inequali ies, hus showing ha esou ce dis ibu ion is no jus iﬁed
o a ional. The p oblem o income inequali y was add essed in he g oundb eaking wo k
o
A kinson e al. (2011).
He p oposed a solu ion o he measu emen o income inequali y
and he dis ibu ion o income, consump ion, and weal h in e ms o subjec i e social
unc ion. He measu ed income inequali y wi hin income dis ibu ion h ough ‘social loss’,
which can be eﬂec ed h ough income, consump ion, o weal h. The e o e, he deba e
9
Economies 2024,12, 259
gene a ed abou socioeconomic wel a e discussed ea lie in his sec ion is jus iﬁed he ein
o explain he concep and measu emen o income inequali y. He belie ed ha , as a
adi ional measu e o income inequali y, he Gini coe ﬁcien ails o explain he wel a e
aspec s imbibed wi hin income inequali y, such as he social loss in unjus esou ce dis-
ibu ion and income inequali ies. The e o e, he Gini coe ﬁcien canno be us ed as an
ul ima e, comple e, and eliable measu e o income inequali y. The concep o social loss
ﬁ s o igina ed in he wo k o Dal on (1920), who deﬁned income inequali y as a loss o
socioeconomic wel a e as a esul o he unjus and une en dis ibu ion o esou ces and
incomes wi hin a socie y.
Sen (1992) e-examined he concep and measu emen o income inequali y on he
pa adigm o capabili y unc ions such as elemen a y unc ion (heal h, nou ishmen , and
shel e ) and social unc ion (sel - espec and communi y li e). The ealiza ion o hese se s
o capabili ies, as p e e ed by any indi idual, eﬂec s his/he capabili y and s anding in
socie y. The e o e, he ailu e o p o ide access o and he a ailabili y o hese unc ions o a
di e en ac ion o socie y eﬂec s he p e ailing le el o income inequali y, which hinde s
human eedom o enjoy he basic needs and wan s. Hence, his heo y explained inequali y
in e ms o social wel a e, whe e people comp omise hei abili y o e ain a espec able
jus iﬁed le el o li e due o nona ailabili y, a lack o access o collec i e esou ces, and a lack
o capabili y. This heo y enhances he concep s o social loss and socioeconomic wel a e
while expanding he deﬁni ion and scope o he concep o income inequali y. Howe e , he
p omising con empo a y heo y o inequali y om Pike y (2014, 2015) p oposed a whole
new dimension o income inequali y and ﬁlled gaps le by ea lie heo ies, especially in
he con ex o mac oeconomic dynamics. The p oposed heo e ical basis is ha , when he
a e o e u n on capi al ( ) is highe han he economic g ow h a e (g) o e a easonable
pe iod, i leads owa d inequali y in he socie y ( >g=IE). The heo e ical a chi ec u e
o his heo y is based on he p ima y and undamen al laws o capi alism. Fo example,
he ﬁ s law says ha he p oduc o he capi al–income a io (
β
) and e u n on capi al ( )
a e equal o he sha e o capi al in he na ional income (
α
). The second law o capi alism
asse s ha
β
is he ou come o he a io be ween na ional sa ing (s) and economic g ow h
(g). Hence, he a e o e u n on capi al is equal o he p oduc sha e o capi al wi hin he
na ional income and a io be ween economic g ow h and he na ional sa ings ( =
α
*g/s).
Pike y’s success ul explana ion o he co ela ions be ween esou ce dis ibu ion,
g ow h, and income inequali y o e a g ea e ex en o ime gi es a new dimension o
he ﬁeld. The majo conce n o he heo y is ha ising inequali ies lead he weal hy
class o inﬂuence he poli ical and economic ins i u ions in hei a o ; his aspec o he
heo y has al eady gained heo e ical endo semen by Acemoglu and Robinson (2013) in
ha ex ac i e economic ins i u ions a o he eli e o ob ain pe sonal beneﬁ s om he
s a e and weaken he ins i u ions’ and na ions’ ailu es despi e ha ing abundan esou ces.
Gal in (2019) p oposed ha coun ies wi h weak ins i u ions canno p e en he impac o
ex e nal shocks, such as ene gy shocks, and such economies a e p one o expe iencing an
economic collapse. Hence, unjus esou ce dis ibu ion (ene gy) leads o income inequali y.
The heo e ical base be ween ene gy used/ene gy supply and income inequali y is no
widely explo ed o esea ched. Howe e , some esea che s ha e used ca bon dioxide
(CO
2
) emissions as a p oxy o ene gy supply and de eloped a heo e ical ela ionship
wi h income inequali y o lay down ounda ions o hei heo ies, such as he ‘equali y
hypo hesis’, which s a es ha income inequali y could be posi i ely associa ed wi h CO
2
emissions, implying ha ene gy-use enhancemen hin s owa d he inequali y o ene gy
supplies and, he e o e, income inequali y (Boyce 1994). On he con a y, some heo is s
belie ed ha inc easing CO
2
emissions play a ai ole in b inging inequali y downwa d,
and a e hus nega i ely associa ed wi h income inequali y (Hee ink e al. 2001).
Simila ly, he comp ehensi e heo e ical jus iﬁca ion o he ela ionship be ween CO
2
emissions/ene gy usage and inequali y p oposed by G unewald e al. (2014), ha , in he
case o de eloping and unde de eloped coun ies, CO
2
emissions a e nega i ely associa ed
wi h income inequali y, hus implies ha mo e ene gy being used in de eloping coun ies
10
Economies 2024,12, 259
would dec ease income inequali y, as he amoun o ene gy used is an indica o o economic
g ow h and de elopmen . Hence, an inc ease in ene gy supplies imp o es economic
g ow h, which he ein ex ends o dec easing inequali ies. The au ho s included Pakis an
in hei analysis, which, he e o e, implies ha a educ ion in CO
2
/ene gy usage/ene gy
supply inc eases he di e ence be ween ene gy supply and demand, which causes ene gy
c ises. This c isis pu s downwa d p essu e on economic g ow h, and he dec easing
economic g ow h de e io a es he esou ce dis ibu ion and income inequali y in Pakis an.
This heo y, he e o e, p o ided he ounda ions o explo ing he ole o an ene gy c isis in
explaining he a ia ions in income inequali y in he case o Pakis an. On he o he hand,
Khan and Heinecke (2018) laid he ounda ions o a heo e ical ela ionship be ween
income inequali y and ene gy supply, while ein igo a ing he deba e on ene gy e ﬁciency
and income dispa i y. Thei p oposed heo y s a es ha an inc ease in ene gy use is
associa ed wi h inc easing dispa i y and is he esul o an inc ease in he ene gy cos
o ha ing ‘good egula ion’ o he sys em. As he sys em becomes unequal, he supply
o ene gy esou ces and se ices becomes inc easingly biased owa d he high-income
ac ions o socie y, whe e he op 20 pe cen o he weal hies ac ion ha e mo e access o
and use o ene gy han he es . The links be ween ene gy and educing inequali ies may be
seen mos clea ly in he con ex o access o ene gy, bu he e a e also cases o ene gy po e y
ela ed o uel po e y. In si ua ions in which people ha e access o ene gy, i is o en he
poo es ha end up using disp opo iona e sha es o hei income o pay o ene gy, in
pa because he highe up on cos s o in es men s in ene gy se ices a e mo e di ﬁcul
o bea o low-income households (Simcock e al. 2017). This hus alida es he claim o
Pike y (2015)
ha when esou ce dis ibu ion a o s he capi alis s mo e han he majo i y,
he e u n on capi al inc eases mo e han g ow h, hence, c ea ing income inequali y.
Ene gy supply is a c ucial ac o in social de elopmen and g ow h and he ad ance-
men o he ans o ma ion o socie y owa d mode niza ion. A limi on he supplies o
ene gy would c ea e a c isis in socie ies. The sus ainable ﬂow o ene gy and ene gy use
is undamen al o indus ial economies and social o ganiza ions. The e o e, o a oid
he ene gy c isis, indus ial socie ies a e equisi e o ﬁnd al e na i e means o ene gy,
Yo k e al. (2004).
Access o ene gy esou ces and supplies is a p e equisi e o de elopmen ,
such ha he dis ibu ion o ene gy supplies and i s access may ha e social epe cussions
and cause economic inequali ies. Awan e al. (2013) a gued ha he majo i y o households
ely on uel consump ion and no ed ha hey ace almos a 55 pe cen dep i a ion in e ms
o ene gy access, especially u al households. While epo ing he bea ing o he ene gy
c isis by socie y, A slan e al. (2014) no ed ha , wi h jus he nona ailabili y o CNG uel,
he social and economic wellbeing o people in Pakis an is a ec ed ad e sely. Mo eo e ,
hey showed ha he ene gy c isis is esponsible o a ec ing he li es yles o people in
gene al. Simila ly, Simcock e al. (2017) epo ed ha he ene gy c isis has ad e sely
a ec ed all sphe es o he wellbeing o people and has escala ed he cos o li ing, especially
o he low-income g oups.
Equali y and wel a e bo h ely on a sus ained and s able ene gy supply o all. Eco-
nomic g ow h and de elopmen is a s ep owa d e adica ion o ene gy dep i a ion and
inequali y, and wi hou sus ainable ene gy supplies, i is di ﬁcul o each he a ge s o
economic de elopmen . The gap be ween he ha es and ha e-no s in e ms o access o
mode n ene gy se ices is widening day by day (Wo ld Bank 2013). Economic de elopmen
has p o en o be a signiﬁcan necessa y condi ion o enhance he ene gy use o he masses;
hus, i is a necessa y condi ion o educe an ene gy c isis expe ienced by any socie y,
Yo k e al. (2004).
Mo eo e , ene gy is he mos c ucial and in eg al pa o p oduc ion
p ocesses and se ices ha enable socie ies o mo e o wa d on he pa h o g ow h, owa d
de elopmen and p ospe i y. Access o ene gy esou ces is a se ious global issue. Today
mo e han hal o he wo ld’s popula ion is dep i ed o access o ene gy, ene gy- ela ed
se ices, appliances, and acili ies. This dep i a ion is a signiﬁcan hu dle and c ea es
es ain s o c ea ing jobs, business oppo uni ies, access o heal h, and educa ion (Wo ld
Bank 2013). Howe e , he si ua ions and scena ios in de eloping and unde de eloped coun-
11

Economies 2024,12, 259
ies such as Pakis an a e ge ing wo se. Mo eo e , coun ies wi h humongous popula ions
and popula ion g ow h a es ace ene gy sho ages. Some o he ea u es o de eloping
and o e popula ed coun ies a e inc easing popula ion and u baniza ion. Alongside o he
beneﬁ s, access o ene gy se ices and supplies is be e , which a ac s he u al popula ion
o mig a e. In his c oss-coun y s udy, Liddle (2013) ound ha u baniza ion inc eases wi h
ene gy use.
Today mo e han one billion people a ound he wo ld ha e no access o elec ici y.
This si ua ion is o ecas ed o be wo se by 2030, when his numbe will inc ease by as much
as wo- old. The condi ions in unde de eloped and de eloping coun ies a e pa icula ly
e ible (Toman and Jemelko a 2003). Mo eo e , u al elec iﬁca ion has been p o en o
educe ene gy po e y, which consequen ly imp o es ene gy equi y and, hus, educes
inequali y. Fu he mo e, he amoun equi ed o mi iga e he gap be ween he ha es and
ha e-no s in e ms o access o ene gy se ices, as well as o p o ide he dep i ed masses
a ound he wo ld wi h necessa y ene gy supplies and se ices, is almos USD 40 billion
annually, which will ise con inually un il 2030 wo ldwide (Sch oe e 2013). Pao e al. (2014)
s essed ha global ini ia i es a e ine i able o he p o ision o necessa y ene gy supplies
and se ices o p oduce oppo uni ies o g ow h and p ospe i y o unde p i ileged and
dep i ed people. Un o una ely, he masses wi h he leas access o esou ces canno li
hemsel es ou o he abyss o mise y, po e y, and income inequali y wi hou access o
mode n ene gy supplies and se ices. The eliance on expensi e oil and uel is no going
o ca e o his se e e issue a ec ing he poo o he wo ld. E en hough he solu ion o
his c isis o income inequali y and une en access o ene gy esou ces has been p o en o
lead o massi e p og ess and de elopmen in enewable ene gy echnologies and se ices,
he adap a ion o such echnologies o de eloping and unde de eloped na ions is nea
nonexis en , which is a sus ained h ea o inc easing income inequali y.
The bulk o ene gy sou ces being used a ound he globe a e no sus ainable (In e na-
ional A omic Ene gy Agency 2005); he e o e, ene gy dep i a ion is a ‘ h ea mul iplie ’
and ‘ h ea ins iga o ’ in mili a y pa lance; ye un o una ely, i ook se e al yea s o
in e na ional communi ies and o ganiza ions o acknowledge he impo ance o ene gy
sus ainabili y and secu i y. This ene gy dep i a ion is conside ed a clea ca alys o un es ,
ins abili y, you h unemploymen , and u baniza ion in socie ies (Bazilian and Yumkella
2015). The li e a u e on ene gy usage/ene gy supply and income inequali y is sca ce,
p ima ily due o he ambiguous heo e ical pa adigm be ween he wo a iables (Be he
and Elie 2015), and empi ical s udies on he ene gy c isis and income inequali y a e almos
nonexis en , a ound he wo ld in gene al, and in Pakis an in pa icula . The e o e, CO
2
emissions can be conside ed as a p oxy o ene gy use, owing o he ac ha mo e han
77 pe cen
o CO
2
emissions a e om ene gy sou ces (EIA, USA 2019; Ceyhan and Sa ibas
2022). As such, Shahbaz (2010), while explo ing he en i onmen al Kuzne s cu e and
he ole o ene gy consump ion in Pakis an, s a ed ha ene gy consump ion inc eases
CO
2
emissions. As pe G unewald e al. (2014), inc easing CO
2
educes inequali y in
de eloping coun ies. The e o e, wi h inc easing CO
2
emissions, income inequali y may
educe in Pakis an.
In pu iew o his, an inc ease in ene gy consump ion signals an inc ease in ene gy
supplies, and i access o ene gy se ices ha e inc eased, and i his expansion includes
he u al and dep i ed a eas, i ce ainly p o ides oom o us o in e ha an ene gy
supply has become a ailable o he dep i ed. The e o e, in o de o ﬁnd o a sh ed o
jus iﬁed empi ical e idence and o in es iga e a plausible associa ion be ween ene gy use
and income inequali y, in many s udies CO
2
emissions can be elied upon and in e ed o
be he ene gy usage. As such, Hee ink e al. (2001) es ed he ela ionship be ween CO
2
emissions and income inequali y in 65 coun ies and ound ha a nega i e associa ion
be ween income inequali y and CO
2
emissions exis s. These esul s insinua ed ha he
inc ease in CO2emissions educes income inequali y. Simila esul s a e also endo sed by
Ra allion e al. (2000) in hei s udy using da a o 42 coun ies om 1975 o 1992, and hey
p o ed ha he e is a s a ic ade-o be ween CO
2
emissions and income inequali y. On he
12
Economies 2024,12, 259
con a y, a a he comp ehensi e and mo e con incing empi ical s udy in his aspec was
comple ed by G unewald e al. (2014), om 1980 o 2008, using a sample o 90 coun ies o
es he ela ionship be ween CO
2
emissions and income inequali y. They concluded ha
coun ies wi h low- and middle-income s a uses possess a nega i e ela ionship be ween
CO
2
emission and income inequali y, and, on he con a y, his ela ionship is posi i e in he
case o de eloped and high-income coun ies. Rea ﬁ ming he abo e esul s, in hei s udy,
G unewald e al. (2017) ound ha , o low- and middle-income economies, highe income
inequali y is associa ed wi h lowe ca bon emissions, while in uppe -middle-income and
high-income economies, highe income inequali y inc eases wi h pe capi a emissions.
Since Pakis an is included in he g oup o low-income coun ies by he au ho s, i is implied
ha he e is a nega i e ela ionship be ween CO2emissions and income inequali y.
The s udies men ioned abo e and hei esul s imply ha income inequali y dec eases
as CO
2
emissions inc ease. And he inc ease in CO
2
emissions is he imposi ion o he ac
ha mo e ene gy is being used a la ge (EIA, USA 2019). The e o e, he possibili y ha
mo e people a e using mo e ene gy and ha e g ea e access o ene gy se ices wi h he
enhanced capaci y o buy ene gy esou ces may indica e a educ ion in income inequali y.
Hence, i p o ides an a enue o jus iﬁca ion ha ene gy use is a i al ool o educing
income inequali y. Mo eo e , he educ ion in CO
2
emissions signals in a d op in ene gy
use. A sus ainable supply o ene gy esou ces and se ices is a necessa y condi ion o
he de elopmen s ages o socie ies. Howe e , wi h he inc easing u iliza ion o ene gy
esou ces, and a g owing popula ion, he s ock and esou ces o ene gy supplies wo ldwide
a e dec easing signiﬁcan ly, aising ea s o g ea e ene gy dep i a ion and pola i y among
na ions and isking he sha e o ene gy o u u e gene a ions (Sahi and Qu eshi 2007). As
such, access o ene gy supplies and se ices a ec he eedom o millions a ound he globe
o access economic oppo uni ies. One o he easons o a eas o he wo ld ha ing emained
unde de eloped is he lack o ene gy supply and se ices o ini ia e economic ac i i ies
(Bazilian and Yumkella 2015). Income inequali y, ene gy po e y, and po e y mo e in
he same di ec ion, as changes in ene gy consump ion’s impac a e a eliable indica o
o p ospe i y. This is why he nega i e co ela ion be ween mode n ene gy se ices and
ene gy dep i a ion is well es ablished and p o en. In o de o educe income inequali y
and ene gy dep i a ion, access o mode n ene gy se ices by he masses mus be imp o ed
(In e na ional Ene gy Agency 2017).
Awan e al. (2013) in es iga ed he si ua ion o ene gy dep i a ion and ene gy po e y
in Pakis an by using he Mul idimensional Ene gy Po e y Index (MEPI). They ound a
high in ensi y o ene gy dep i a ion and po e y h oughou he coun y. The compa a i e
analysis and esul s be ween u al and u ban popula ions showed ha he u ban popula ion
in he coun y enjoys g ea e access o ene gy se ices han he u al popula ion. As much
as 71 pe cen o he popula ion in u al a eas o Pakis an a e dep i ed o ene gy se ices
and supplies compa ed o 29 pe cen in u ban a eas. This si ua ion is a eﬂec ion o he
p e alence o dispa i ies in his socie y, in which u ban popula ions no only ha e g ea e
access o ene gy supplies bu also socioeconomic oppo uni ies o explo e and wi h a
highe pe capi a income compa ed o he u al populace. This also sugges s ha he u al
populace compa a i ely expe ience a highe -p essu e ene gy c isis, ﬁ s based on hei
limi ed access o ene gy supplies and se ices, and, secondly, hei abili y o buy mo e
ene gy when i is expensi e emains low due o hei income. The e o e, he pe sis en
ene gy c ises o e he yea s has con ibu ed o widening hese gaps in pola i y and income
inequali y in he coun y.
This s udy employs he dynamic o dina y leas squa es (DOLS) me hod o analyze
he impac o he ene gy c isis on income inequali y om 1997 o 2021. The DOLS me hod
is chosen o i s abili y o handle endogenei y and se ial co ela ion issues, p o iding
unbiased and e ﬁcien es ima es (Lü kepohl 2001). This me hod is pa icula ly ele an o
ou s udy as i allows o he inco po a ion o long- e m equilib ium ela ionships among
a iables, which is essen ial o unde s anding he pe sis en e ec s o ene gy c ises on
income inequali y.
13
Economies 2024,12, 259
Al hough, MEPI as an index o ene gy dep i a ion and po e y, i is also an excel-
len way o measu e he income inequali y de i ed h ough ene gy supply and se ices;
howe e , he au ho s belie e ha i does no in eg a e all o he elemen s o sus ainable
ene gy. As such, ad ancemen in he ﬁeld o ene gy economics is equi ed. Mahmood and
Shah (2017) also concei ed simila esul s, while ex ending he applica ion o MEPI o he
u al and u ban a eas o Pakis an. Thei s udy emained ocused on a compa a i e analysis
and in es iga ion o he di e ences in ene gy dep i a ion and access o ene gy esou ces
and se ices be ween u al and u ban a eas o he coun y. They ound ha , on a e age, a
household in Pakis an is 26.4 pe cen dep i ed o essen ial ene gy se ices and supplies.
The ala ming na u e o his si ua ion is ha his dep i a ion is ch onic and pe sis en , wi h
he dep i a ion in u al a eas being massi ely g ea e compa ed o he le el o ene gy de-
p i a ion in u ban a eas o he coun y. Wi h hese esul s, i can be a gued ha he pola i y
and dep i a ion in access o p ima y ene gy supply and se ices a e he ounda ional cause
o pe sis en income inequali y and he ene gy c isis in he coun y. They belie e ha he
lack o go e ning wisdom and poli ical will a e esponsible o b inging socie y o his
edge. Mu aza and Fa idi (2015) al eady p oduced simila esul s and showed ha he
p og ess in ene gy de elopmen in Pakis an inc eased du ing he ﬁ s hal o his cen u y
bu a a plodding pace. Un o una ely, e en his slow and meag e ene gy de elopmen and
g ow h s a ed dec easing a e he ene gy shocks and c ises o 2007 and 2011, esul ing
in inc eased ene gy po e y, income inequali y, and dispa i ies o he coun y. The le el
o income inequali y is oo ed in he o e all economic p og ess and de elopmen o a
coun y. An inc easing economic pe o mance is conside ed o ha e an impac on he
le el o ea nings o households, which e en ually ans o ms in o households’ inc easing
abili y o access o mode n se ices and ene gy esou ces. Such an idea is p oposed by
Kuzne (1955), who belie ed ha s uc u al adjus men o economic g ow h can educe
he dep i a ion and income inequali ies in socie y, as socie y c osses di e en le els o
g ow h and de elopmen . He u he con empla ed ha he e y ea ly and ini ial s ages o
economic g ow h yield income inequali y, and la e , when a s eady s a e is achie ed, income
inequali y is po en ially educed, based on he p emise o indus ializa ion, u baniza ion,
and he ickle-down e ec o economic g ow h o he lowes ac ion o he socie y. O e
he yea s, economis s all o e he wo ld ha e s udied he applica ion o Kuzne s heo y
in di e en scena ios wi hou conside ing he collec ed his o ical da a o imp o ing he
empi ical alidi y o he heo y o hei espec i e socie ies (Pike y 2014). Shahbaz (2010)
wi nessed a simila applica ion o Kuzne s’s heo y o income inequali y in Pakis an and
showed ha economic g ow h leads o a educ ion in inequali y. Howe e , he au ho
ailed o align his esul s and ou comes wi h he g ow h s ages o he unde pinning heo y.
On he con a y, Zouhaie and Ka im (2012) ound a nega i e e ec o economic g ow h on
inequali y and p oposed he need o a be e me hodological unde s anding o ob ain mo e
accu a e esul s. Sha a a e al. (2014) eached simila esul s and ound ha inc easing
economic g ow h is associa ed wi h he inc ease in income inequali y in Pakis an.
Sen (1992) aised a poin on he mo al alidi y o esea che s’ app oaches owa d s udy-
ing inequali y a he han using objec i e-d i en esea ch. Simila ye igo ous esul s a e
o wa ded by Checchi and Ga cía-Peñalosa (2008). They s udied 21 coun ies and eached
he conclusion ha labo ma ke ins i u ions a e he p ominen d i ing o ce in he de e -
mina ion o inequali y; a mo e eliable ins i u ion would esul in dec easing inequali y.
Sus ained and su ﬁcien ene gy esou ce dis ibu ion is p edominan ly ag eed o ely
on he ac o o socioeconomic p ospe i y. Howe e , ene gy esou ce alloca ion, e ﬁciency,
and conse a ion ha e long been c i ical elemen s in he ene gy policy dialogue. They
ha e aken on enewed impo ance as conce ns abou global clima e change and ene gy
secu i y ha e in ensiﬁed in a coun y whe e 51 million o mo e people a e s ill wi hou
elec ici y, wi h he na ional elec iﬁca ion a e being almos 73 pe cen (Wo ld Bank G oup
2014). Many ad oca es and policymake s main ain ha educing he demand o ene gy is
essen ial o mee ing he challenges o ene gy dep i a ion and inequali ies, and analyses
end o ﬁnd ha educ ions in demand can be cos -e ec i e means o add essing he
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Economies 2024,12, 259
conce ns o a sho age in ene gy supplies in he coun y and hence can cu ail he ongoing
ene gy c isis, being known as ene gy conse a ion plans. Howe e , he e is a di e ence
in educing demand and cu ailing i . Fo ins ance, u al a eas in Pakis an ba ely ha e a
63 pe cen
elec iﬁca ion a e compa ed o 90 pe cen in u ban a eas, showing he inequali y
in ene gy esou ce dis ibu ion. The e o e, any conse a ion p og am ha educes ene gy
demand indi e en ly be ween he u ban and u al masses would hampe he social and
economic ac i i ies o he coun y and e en ually inc ease he h ea o socioeconomic
g ow h and wel a e (Wo ld Bank G oup 2014). The ene gy esou ce dis ibu ion and
income inequali y hypo hesis p o ed ha , in he case o de eloping coun ies, an inc ease
in ene gy use dec eases income inequali y. The e o e, any policy ha educes ene gy
demand helps o enhance income inequali y in de eloping coun ies and, hus, se es as a
h ea o he wel a e le el o he public by inc easing dep i a ion and has a di ec bea ing
on income inequali y (Mahmood and Shah 2017).
3. Me hodology, Va iables, and Model
Income inequali y (IE) is he dependen a iable, ene gy c isis (EC) is an indepen-
den a iable, and oil p ice shocks (OPS), g oss domes ic p oduc (GDP), and popula ion
(POP) a e con olled a iables. In e ac ion e ms a e in oduced o cap u e he indi ec
impac o o he independen a iables. The ole o he ene gy c isis (EC) as a de e mi-
nan o income inequali y (IE) is g ounded in he heo e ical and empi ical ﬁndings o
G unewald e al. (2017),
Awan e al. (2013), and Mahmood and Shah (2017). These s ud-
ies collec i ely es ablish ha s sca ci y o ene gy p oduc ion is a undamen al cause o
he ene gy c isis, which, in u n, exace ba es income inequali y. The heo y o inequali y
(Pike y 2014)
is ad anced o be employed o unde s anding inequali y a he na ional
le el. This heo y s a es ha , i he e u ns on capi al emain g ea e han economic g ow h,
his could lead o IE. The household ﬁnal consump ion expendi u es (HFCE) a e nega i ely
a ec ed due o he inc ease in EC; as a esul , households’ capaci y and abili y o access
ene gy supplies is educed, causing inequali ies. As such, Bazilian and Yumkella (2015) be-
lie e ha a lack o access o ene gy inc eases economic dep i a ion and dec eases business
oppo uni ies, and his dep i a ion ansla es in o IE. Simila p opaga ion is con empla ed
by Idd isu and Bha acha yya (2015), who heo ized ha ene gy dep i a ion is a i al
sou ce o IE in a socie y, i no jus iﬁed based on a a ional esou ce dis ibu ion mechanism.
The ollowing Table 1 con ains he lis o a iables wi h uni s o measu emen and sou ces.
Table 1. Va iables’ measu emen and sou ces.
Va iable Uni o Measu emen Da a Sou ce
Ene gy C isis Kilos o Oil Equi alen
Wo ld Bank Da a Bank, Pakis an Ene gy Yea Books,
Pakis an Economic Su ey, Bu eau o S a is ics
Poli ical Ins abili y Index (0–100) In e na ional Coun y Risk Guide
Inﬂa ion Ra e Pe cen age Pakis an Bu eau o S a is ics, Economic Su ey
o Pakis an
Popula ion Numbe s Pakis an Bu eau o S a is ics, Economic Su ey
o Pakis an
Income Inequali y Ra e/Pe cen age
Pakis an Bu eau o S a is ics, Economic Su ey o
Pakis an, House Hold In eg a ed Economic Su ey
o Pakis an, Minis y o Finance
G oss Domes ic P oduc Uni ed S a e Dolla s Pakis an Bu eau o S a is ics, Economic Su ey o
Pakis an, Minis y o Finance
Household Final Consump ion
Expendi u e Uni ed S a e Dolla s
Pakis an Bu eau o S a is ics, Economic Su ey o
Pakis an, House Hold In eg a ed Economic Su ey
o Pakis an, Wo ld Bank Da a Bank
Oil P ice Shocks Ne Oil P ice Inc ease Wo ld Bank Da a Bank
15
Economies 2024,12, 259
Table 4. Long- un dynamic es ima ion esul s.
Va iable Coe ﬁcien S d. E o -S a is ic P ob.
EC 1.00 0.22 4.36 0.01 *
PIS −8.40 2.04 −4.11 0.01 *
OPS −4.08 1.62 −2.52 0.06 **
INF 6.11 1.68 3.63 0.02 *
HFCE 8.80 4.05 2.17 0.09 **
GDP −3.19 ×10−96.97 ×10−10 −4.57 0.01 *
POP 3.11 ×10−61.01 ×10−63.08 0.03 *
C−1882.1 413.29 −4.55 0.01 *
R-Squa ed
Adjus ed R-Squa ed
S.E. o Reg ession
Long-Run Va iance
0.96
0.68
11.46
53.26
Mean Dependen Va .
S.D. Dependen Va .
Sum Squa ed Resid.
11.41
20.45
525.54
*, ** Deno e signiﬁcance a 5 pe cen and 10 pe cen , espec i ely.
Table 5. Null hypo hesis: D (DOLSRESIDUALS) has a uni oo .
-S a is ic P ob.
Augmen ed Dickey–Fulle Tes S a is ic −6.26 0.00 *
Tes C i ical Values: 1% le el −3.65
5% le el −2.95
10% le el −2.61
* Deno es signiﬁcance a he 5 pe cen .
Table 6. Dynamic DOLS esidual ADF es .
Va iable Coe ﬁcien S d. E o -S a is ic P ob.
D(DOLSRESIDUALS(-1)) −8.80 1.40 −6.26 0.00 **
D(DOLSRESIDUALS(-1),2) 6.47 1.28 5.04 0.00 **
D(DOLSRESIDUALS(-2),2) 5.21 1.07 4.84 0.001 **
D(DOLSRESIDUALS(-3),2) 3.91 0.85 4.57 0.001 **
D(DOLSRESIDUALS(-4),2) 2.65 0.63 4.20 0.003 **
D(DOLSRESIDUALS(-5),2) 1.48 0.40 3.69 0.001 **
D(DOLSRESIDUALS(-6),2) 0.50 0.16 3.07 0.005 *
C 0.15 0.58 0.27 0.788
R-Squa ed 0.91 Mean Dependen a . −0.37
Adjus ed R-Squa ed 0.89 S.D. Dependen a . 10.02
S.E. o Reg ession 3.31 Akaike In o C i e ion 5.44
Sum Squa ed Resid. 263.63 Schwa z C i e ion 5.81
Log-Likelihood −79.14 Hannan–Quinn C i e ia 5.56
F-S a is ic 37.08 Du bin–Wa son S a . 2.02
P ob. (F-S a is ic) 0.000
*, ** Deno e signiﬁcance a he 5 pe cen and 10 pe cen , espec i ely.
Table 7. Wald Tes o DOLS.
Tes S a is ic Value d P ob.
F-s a is ic 14.80 (6, 4) 0.01 *
ሆ288.83 6 0.00 *
Null Hypo hesis: C(2) = C(3) = C(4) = C(5) = C(6) = C(7) = 0
* Deno es signiﬁcance a 5 pe cen .
22

Economies 2024,12, 259
Figu e 2. CUSUM.
Figu e 3. CUSUMSQ.
5. Conclusions and Policy Recommenda ions
The links be ween ene gy and educing inequali ies ha e been wi nessed in an e iden
manne in he o ms o he access o and he supply o ene gy. In Pakis an, he majo i y o
people may ha e access o ene gy supplies. Howe e , i is o en he ac ions o socie y ha
a e unde p i ileged, below he ex eme po e y line, and he middle classes who a e using
disp opo iona e amoun s o hei incomes o pay o ene gy supplies and se ices; o some
ex en , his is because o he highe up on p ices o ene gy supplies, expensi e p oduc s,
and expensi e impo ed ene gy appliances. The nona ailabili y o low-cos ene gy supplies
mainly a ec s unde de eloped egions, which ha e he majo i y o low-income households.
Howe e , his is equally applicable o middle- and lowe -income g oups o he coun y,
who gene ally compose he majo i y li ing in unde p i ileged u al a eas, o whom ene gy
is an inelas ic undamen al necessi y o li ing, and a signiﬁcan ac ion o hei ene gy
consump ion is o ensu e basic su i al. The e o e, augmen ing and ex ending he supplies
o mode n, domes ic, cleane , indigenous, and low-cos ypes o ene gy a e signiﬁcan o
his s a um o socie y. A he same ime, he equally ine i able equi emen is o diminish
he excessi e sha e o hese g oups’ expendi u es on ene gy supplies and se ices. The
analysis o he esul s in he p e ious sec ion shows ha in mos o he coun y, low-income
g oups spend a mo e signiﬁcan sha e o hei income on ene gy p oduc s, supplies, and
se ices han highe -income ac ions.
Fai and equal access o ene gy supplies and se ices is less likely o educe income
inequali y i i is no cos e ﬁcien , which is an un o una e ac in he case o Pakis an. The
elec ici y a i sys ems c ea e nonp oduc i e indica ions o he p o ision o low-cos
23
Economies 2024,12, 259
supplies o ene gy ins ead o leading and acili a ing access o ene gy sou ces. Cau ious
delibe a ion ega ding ene gy a i s uc u es is ine i able, bu a he same ime, he sa e y
ne s and social secu i y p og ams o he poo es needed o be expanded. A his s age,
he ene gy supply is a ge ing ene gy p ices ha will subs an ially ulﬁl he objec i es
o educing pola i ies and inc easing eal incomes, whe eas i is equally impo an o ex-
pand cos -e ec i e and e ﬁcien household ins umen s ela ed o housing, anspo a ion,
ag icul u e, small domes ic-scale p oduc ion p ocesses, and wa e pumping. Ini ia i es
on ene gy policy a e equi ed o ans o m om a bina y unde s anding o a quali a i e
pa adigm ega ding access, a ailabili y, p o ision o ene gy, and income inequali y. The e
is a need o quan i y he ac ual ac ion o he o al popula ion ha is dep i ed o basic, as
well as cos -e ec i e, ene gy supplies and se ices, and, a he same ime, o encompass
he ba ie s o p o iding cheap ene gy supplies o u al a eas and cons ain s o small- and
medium-household in es men s, h ough he Scheme o Financing Renewable P ojec s
(S a e Bank o Pakis an 2016), and he associa ed isks. The e o e, he ﬁ s plan o ac ion o
he go e nmen should be o acili a e he p i a e sec o and main ain he ease o doing
business by educing secu i y and he ela ed in es men isks so ha small-household
ﬁnancial policy de- isking ins umen s may be in oduced and echnical se ices may be
p o ided gea ed owa d he ins alla ion o low-cos enewable ene gy p oduc s o he
low-income households, as pe he Al e na i e and Renewable Ene gy Policy (2019). Ideally,
i should s a in u al a eas which ha e ewe oppo uni ies o access mode n ene gy se -
ices and supplies. The ac o s ha inﬂuence uni e sal access o ene gy se ices, supplies,
and quali y, as well as equi y should be he undamen al objec i e o socioeconomic and
sociopoli ical decision-making ins i u ions. The poli ical eli e should mode a e hei con-
sensus a ound he p o ision o a o dable ene gy supplies o educe ene gy po e y, ene gy
dep i a ion, and inequali ies. This may equi e he implemen a ion o s ic anspa ency
measu es in he ene gy sec o , ha monizing he p o inces, including Gilgi -Bal is an, Azad
Jammu Kashmi , p i a e s akeholde s, and p o incial go e nmen s, o in eg a ed ene gy
policies o a g ass oo s-le el ans o ma ion. The d a o an inclusi e, uniﬁed, in eg a ed
ene gy policy o be en o ced o p i a e in es o s, public en e p ises, and ede al and local
go e nmen s alike o expand and o e special ene gy se ices and supplies o u al a eas
and he unde p i ileged ia clean and g een ini ia i es should be de eloped. Meanwhile,
egula o s can de ise a s a egy o link ene gy a i s and axes o income le els and egula e
he p icing acco dingly.
Fu u e esea ch should ocus on e alua ing he impac o elec ici y p icing s uc u es
on di e en income g oups and he e ec i eness o social sa e y ne s in educing high
elec ici y p ices. I is also impo an o examine he ba ie s o he use o enewable ene gy
solu ions ha beneﬁ u al a eas. In addi ion, esea ch should examine how poli ical ideol-
ogy and unde s anding a ec sus ainable ene gy policy and explo e how he p i a e sec o
can con ibu e o enhancing public pe o mance in imp o e ene gy access
and a o dabili y.
Au ho Con ibu ions:
Concep ualiza ion, S.S.; da a cu a ion, R.A., Y.Y. and Q.A.; o mal analysis,
S.S. and J.H.; unding acquisi ion, L.J.; me hodology, J.H., R.A. and S.S.; p ojec adminis a ion, L.J.;
esou ces, S.S. and Y.Y.; w i ing—o iginal d a , S.S., Q.A. and R.A.; w i ing— e iew and edi ing, Y.Y.,
S.S. and Y.Y. All au ho s ha e ead and ag eed o he published e sion o he manusc ip .
Funding:
Minis y o Science and Technology, China. Na ional Fo eign Expe P ojec High-End
Fo eign Expe In oduc ion Plan. Educa ional a ﬁc conges ion managemen in China’s megaci ies
o he “ca bon peaking and ca bon neu ali y” S a egy—Machine lea ning model based on Na ional
Big Da a o New Ene gy Vehicles (NDANEA) (QN2022178002L).
Ins i u ional Re iew Boa d S a emen : No Applicable.
In o med Consen S a emen : No Applicable.
Da a A ailabili y S a emen :
The da a can be ob ained upon eques om he co esponding au ho s.
Conﬂic s o In e es : The au ho s decla e no conﬂic s o in e es .
24
Economies 2024,12, 259
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27

Ci a ion: Seabela, Molepa, Kanayo
Ogujiuba, and Ma ia Eggink. 2024.
De e minan s o Income Inequali y in
Sou h A ica: A Vec o E o
Co ec ion Model App oach.
Economies 12: 169. h ps://doi.o g/
10.3390/economies12070169
Academic Edi o : Fabio Clemen i
Recei ed: 20 Ap il 2024
Re ised: 3 June 2024
Accep ed: 5 June 2024
Published: 1 July 2024
Copy igh : © 2024 by he au ho s.
Licensee MDPI, Basel, Swi ze land.
This a icle is an open access a icle
dis ibu ed unde he e ms and
condi ions o he C ea i e Commons
A ibu ion (CC BY) license (h ps://
c ea i ecommons.o g/licenses/by/
4.0/).
economies
A icle
De e minan s o Income Inequali y in Sou h A ica: A Vec o
E o Co ec ion Model App oach
Molepa Seabela, Kanayo Ogujiuba * and Ma ia Eggink
School o De elopmen S udies, Uni e si y o Mpumalanga, Mbombela 1200, Sou h A ica
*Co espondence: [email p o ec ed]
Abs ac :
The issue o income dispa i y has long plagued Sou h A ica because o he poli ical
en i onmen ha exis ed be o e he coun y’s 1994 democ a ic ansi ion. Based on he widely used
Gini index, which gauges global inequali y, he na ion ou inely has some o he highes a es o
income dispa i y in he wo ld. Income inequali y in Sou h A ica keeps ising e en a e a numbe
o amewo ks and policies ha e been pu in place, which has a big inﬂuence on socie y. Thus, i is
essen ial o comp ehend he causes o income dispa i y and pu sui able policies in place o emedy i .
The pu pose o his s udy is o look in o he ela ionship be ween Sou h A ica’s income dispa i y and
i s de e minan s. Using he Vec o E o Co ec ion Model (VECM) app oach, his s udy empi ically
examines he e ec s o go e nmen spending on social g an s, g oss sa ings, popula ion g ow h,
and economic g ow h on income inequali y om 1975 o 2017. Da a on he Gini index a e sou ced
om he S anda dized Wo ld Income Inequali y Da abase (SWIID). Findings e eal a s a is ically
signiﬁcan nega i e co ela ion be ween go e nmen spending on social g an s and income inequali y.
Mo eo e , income inequali y demons a es a nega i e ela ionship wi h bo h g oss sa ings and
economic g ow h. Howe e , popula ion g ow h exhibi s a posi i e co ela ion wi h income inequali y.
This s udy highligh s he signiﬁcance o implemen ing a comp ehensi e s a egy o add ess income
inequali y in Sou h A ica. This s a egy should in ol e augmen ing go e nmen expendi u e on
social g an s, cul i a ing a sa ings cul u e wi hin households, and enac ing policies ha incen i ize
job c ea ion, pa icula ly in a eas wi h apid popula ion g ow h. In addi ion o making a subs an ial
con ibu ion o he body o e idence al eady a ailable on income dispa i y, his s udy o e s insigh ul
in o ma ion o policymake s wo king o imp o e he socioeconomic clima e in Sou h A ica.
Keywo ds:
income inequali y; go e nmen spending on social g an s; Gini coe ﬁcien ; VECM;
Sou h A ica
JEL Classiﬁca ion: C51; D63; H53
1. In oduc ion
In ecen yea s, he e has been a g owing global ocus on income inequali y, pa icula ly
i s signiﬁcan impac on de eloping coun ies such as Sou h A ica. This s udy del es in o
he complex dynamics o income inequali y wi hin Sou h A ica i espec i e o a my iad o
poli ical and socioeconomic challenges con on ing i . I examines he in ica e ela ionship
be ween go e nmen spending on social g an s and income inequali y. Using he Vec o
E o Co ec ion Model (VECM), his s udy p o ides a de ailed analysis o hese dynamics.
E e since he coun y’s democ a ic ansi ion in 1994, Sou h A ica has aced g owing
anxie y o e he p oblem o inc easing weal h dispa i y. The pe sis en upwa d end in
income inequali y highligh s he complexi y o add essing i s unde lying causes h ough
policy and in e en ion me hods, e en in he ace o widesp ead implemen a ion o social
spending measu es. The poli ical en i onmen ha Sou h A ica ﬁnds i sel in igh now
p esen s challenges o hese endea o s. Howe e , he a ailable empi ical academic esea ch
indica es conﬂic ing ela ionships be ween he amoun o money he go e nmen spends
Economies 2024,12, 169. h ps://doi.o g/10.3390/economies12070169 h ps://www.mdpi.com/jou nal/economies
28
Economies 2024,12, 169
on social g an s and income dispa i y. Addi ionally, he e a e s ill unanswe ed ques ions
abou he ela ionships be ween g oss sa ings, popula ion inc ease, economic expansion,
and income inequali y.
To comp ehend income inequali y bo h be ween and wi hin g oups, a ious inequali y
measu es come in o play such as he Gini coe ﬁcien , a widely u ilized measu e anging
om ze o (indica ing pe ec equali y) o one (indica ing pe ec inequali y). D awing
om he S anda dized Wo ld Income Inequali y Da abase (SWIID), his s udy examines
Gini indices o income inequali y, conside ing bo h g oss and ne incomes om 1975
o 2017. The Sou h A ican go e nmen h ough he Na ional De elopmen Plan (NDP)
aims o educe income inequali y om 0.70 o 0.60 by he yea 2030. Despi e he a ious
d a ed and implemen ed policies, Sou h A ica emains he mos unequal coun y globally
(IMF 2020). Se e e income inequali y has pe sis ed o e he las cen u y, indica ing he
necessi y o comp ehensi e economic e o ms ei he h ough policy o legal p esc ip s.
As Leibb and and Shipp (2019) opined, educing inequali y equi es a ge ed policies
ha add ess dispa i ies in ea nings and employmen p ospec s and ongoing suppo o
diminish gende and acial income inequali ies.
I espec i e o he poli ical clima e and o ien a ion held by hose in au ho i y, his
s udy con ends ha exis ing policies and amewo ks all sho in he ace o g owing
income inequali y, u ging a e-e alua ion o he con ibu ing ac o s o income inequali y.
This s udy ocuses on Sou h A ica, a coun y known o i s s uggle wi h income inequali y.
I p o ides aluable insigh s ha can in o m na ional policy and global discou se on income
inequali y. This s udy’s inclusion o da a spanning om 1975 o 2017 allows o a com-
p ehensi e analysis o long- e m ends and dynamics, p o iding a s ong ounda ion o
policy ecommenda ions and u u e esea ch di ec ions. Conside ing he a o emen ioned
backg ound, his s udy in es iga ed how go e nmen socioeconomic spending, pa icula ly
on social g an s, a ec s income inequali y. Addi ionally, he oles o g oss sa ings, popula-
ion g ow h, and economic g ow h in shaping income inequali y we e analyzed. The pape
ollows he ollowing layou : Sec ion 2 c i ically analyzes he li e a u e, encompassing bo h
he heo e ical amewo k and empi ical s udies on he ela ionship be ween go e nmen
spending on social g an s and income inequali y. This sec ion del es in o exis ing esea ch
o p o ide a comp ehensi e unde s anding o he opic. Sec ion 3 ou lines he da a and
me hodology u ilized in he s udy. Sec ion 4 p esen s he ﬁndings and engages in a de ailed
discussion. Finally, Sec ion 5 concludes he s udy, o e ing policy ecommenda ions based
on he esul s o he s udy.
2. Rela ed Li e a u e
Income inequali y, a p essing issue in bo h de eloped and de eloping economies,
is inﬂuenced by a a ie y o ac o s. This li e a u e e iew consolida es insigh s om
seminal wo ks, global- and eme ging-ma ke s udies, and speciﬁc s udies ocused on
A ica, pa icula ly Sou h A ica, o comp ehensi ely unde s and how each ac o a ec s
income inequali y. These ac o s a e no only c ucial in he con ex o income inequali y bu
a e also connec ed o impo an wo ks in economics ha o e bo h heo e ical ounda ions
and empi ical e idence o unde s anding he complex ela ionships be ween hem and
income inequali y.
2.1. Seminal Wo ks
Al hough exac ly wha causes income inequali y canno be de e mined due o he
a ie y o ac o s ha play a ole, in his s udy some o he c ucial ac o s a e iden iﬁed.
Financial de elopmen , economic g ow h, ex e nal ade, and go e nmen ini ia i es can
help mi iga e income inequali y, whe eas inﬂa ion wo sens i (Kapingu a 2017).
A undamen al componen o Keynesian economics, go e nmen expendi u e on so-
cial wel a e p og ams plays a c ucial ole in managing economic ﬂuc ua ions and lessening
income inequali y (Vo e al. 2019). Such policies can s abilize agg ega e demand, achie e
ull employmen , and mi iga e income inequali y (Vo e al. 2019). In his inﬂuen ial wo k
29
Economies 2024,12, 169
du ing he G ea Dep ession, John Mayna d Keynes es ablished he amewo k o Keyne-
sian economics, highligh ing he signiﬁcance o agg ega e demand in p opelling economic
ac i i y (Jahan e al. 2014). Keynes p oposed go e nmen in e en ion h ough expansion-
a y ﬁscal policies o add ess economic ﬂuc ua ions, a ain ull employmen , s abilize p ices,
and diminish income inequali y (Jahan e al. 2014; Alamanda 2020).
Fishbu n and Willig (1984) ex ended Dal on’s p inciple o ans e o income edis i-
bu ion, demons a ing ha socially desi able ans e s, coupled wi h in e se ans e s a
highe income le els, yield posi i e social beneﬁ s. They linked hese ans e p inciples o
measu es o income inequali y and social wel a e. Le man and Yi zhaki (1995) de eloped
a me hod o decompose changes in he Gini coe ﬁcien in o componen s ha na ow he
income gap and eo ganize income ankings. When his app oach was used o analyze U.S.
axes and ans e s o 1991, i was demons a ed ha ﬁscal policies ha e he po en ial o
lessen inequali y by educing income gaps and eo de ing income ankings.
Apa om go e nmen in e en ion in he o m o edis ibu ion o income, sa ings
can also play a ole in income inequali y. The ela ionship be ween sa ings and income
inequali y is complex. While sa ings can con ibu e o weal h inequali y, hey can also
se e as a sa e y ne and educe po e y (Vo e al. 2019). Shen and Zhao (2022) ound
ha he impac o sa ings on income inequali y a ies ac oss di e en subg oups and
economies. Se en and Schmid -Hebbel (1999) ound no e idence ha income inequali y
a ec s agg ega e sa ing ac oss coun ies, whe eas a s udy by Schmid -Hebbel and Se en
(2000) highligh ed he heo e ical ambigui y in he ela ionship be ween income inequali y
and agg ega e sa ings, wi h empi ical esul s showing no sys ema ic e ec . The ela i e
income hypo hesis (RIH) acco ding o Duesenbe y (1949) and he pe manen income hy-
po hesis (PIH) p oposed by F iedman (1957) a e wo impo an heo ies o unde s anding
consump ion pa e ns, indica ing ha consump ion pa e ns a e inﬂuenced by ela i e
income and expec ed li e ime income, espec i ely. In mode n socie ies, social s a us and
ela i e income ha e a majo impac on consump ion pa e ns. A s udy by Bisse and
Tenaw (2020) showed ha low-income indi iduals adjus ed hei consump ion o keep
pace wi h o he s, showing s ong “p oo e ec s” and “ a che e ec s”. A s udy by Palley
(2010) ound ha weal hy households sa e mo e pe manen income han poo households,
sugges ing ha ela i e income inﬂuences consump ion pa e ns. S able, long- e m income
policies can educe income inequali y by s abilizing consump ion pa e ns (Yun e al. 2023).
Ano he componen ha is iden iﬁed by he li e a u e as playing a ole in income
inequali y is popula ion g ow h. High popula ion g ow h is gene ally associa ed wi h a less
equal income dis ibu ion (Ram 1984; Oyekale e al. 2004; Kaasa 2005). Reducing popula ion
g ow h ends o inc ease he income sha e o he poo es segmen s o he popula ion
(Rodge s 1983; Oyekale e al. 2004). Lowe popula ion g ow h and limi ed mig a ion may
con ibu e o inc eased na ional and global economic inequali y (Pe e son 2017).
Al hough economic g ow h may seem impo an o he educ ion o income inequal-
i y, he ela ionship be ween income inequali y and economic g ow h is mo e complex.
Simon Kuzne s (1955) p oposed he Kuzne s cu e, which shows an in e ed U-shaped
ela ionship be ween economic de elopmen and income inequali y. This sugges s ha
inequali y is a empo a y phase in he de elopmen p ocess. A hu Lewis’s (1954) dual-
sec o model explains economic de elopmen h ough labo ans e om a adi ional
o a mode n sec o , ini ially inc easing inequali y bu e en ually dec easing i as mo e
wo ke s ansi ion o highe -paying indus ial jobs (Sumne 2018). Lewis s essed he
impo ance o go e nmen in e en ion o acili a e his ansi ion and ensu e ai income
dis ibu ion (Sumne 2018). Pike y (2014) a gues ha e u ns on capi al exceed he a e
o economic g ow h and capi al e u ns a e highe han wages. He sugges s ha income
inequali y inc eases because wages g ow mo e slowly han e u ns on capi al. Pike y’s
wo k emphasizes he need o p og essi e axa ion and policies o p omo e equal access
o educa ion and oppo uni ies in o de o add ess income inequali y (Sawye 2015). Mo
(2000) de eloped a heo e ical amewo k e ealing ha income inequali y nega i ely
inﬂuences GDP g ow h, pa icula ly h ough he ans e channel. Empi ical s udies in-
30
Economies 2024,12, 169
dica e ha while economic g ow h can educe po e y, income inequali y can in ensi y
po e y and exace ba e he impac o g ow h on po e y (Amponsah e al. 2023). Economic
g ow h exhibi s po e y- educ ion p ope ies, bu income inequali y in ensiﬁes po e y
and agg a a es he impac o g ow h on po e y (Adeleye e al. 2020). The impac o
GDP g ow h on po e y educ ion diminishes wi h highe ini ial inequali y, wi h a smalle
po e y- educ ion esponse in sub-Saha an A ica (Fosu 2009).
E idence om empi ical s udies o de e mine how hese heo ies apply and how hese
ac o s o income inequali y play a ole will be discussed u he .
2.2. A ica/Sou h A ican S udies
Leibb and e al. (2012) disco e ed ha social ans e s, pa icula ly child suppo
g an s and old-age pensions, played a c ucial ole in dec easing po e y and income in-
equali y in Sou h A ica. Woola d e al. (2015) demons a ed ha p og essi e axes and
p o-poo social spending signiﬁcan ly educe income inequali y in Sou h A ica. The
ﬁndings indica e a nega i e ela ionship be ween p og essi e axes and p o-poo social
spending. Addi ionally, Schiel e al. (2014) ound ha while social g an s ha e helped
alle ia e po e y, hey ha e no signiﬁcan ly educed income inequali y in Sou h A ica.
Household composi ion decomposi ion echniques e ealed ha changes ha e signiﬁcan ly
educed he di ec impac on inequali y h ough changes in household composi ion. Con-
sequen ly, he ela ionship be ween go e nmen expendi u es and income inequali y is
deemed insigniﬁcan . Despi e he i al ole played by social g an s in educing Sou h
A ica’s pe sis en ly high le els o inequali y, g ea e e o s a e needed o u he educe
income inequali y as i emains ela i ely high.
The impac o sa ings on economic g ow h in Sou h A ica is nega i e in he long
un bu posi i e in he sho un (Van Wyk and Kapingu a 2021). The de elopmen o he
ﬁnancial sec o , especially when inclusi e, can educe income inequali y, making ﬁnancial
inclusion c ucial o beneﬁ ing disad an aged g oups (Kapingu a 2017). Acco ding o Yun
e al. (2023), he go e nmen may conside in oducing a policy ha allows ax deduc ions
o e i emen sa ings. Addi ionally, he go e nmen can design wel a e and social secu i y
p og ams o p o ide indi iduals wi h a s eady income o e he long e m a he han sho -
e m cash paymen s. High popula ion g ow h in low-income coun ies, including many
in A ica, may slow economic de elopmen and exace ba e income inequali y (Pe e son
2017). Limi ed mig a ion and lowe popula ion g ow h could inc ease economic inequali y
bo h na ionally and globally. S udies by Nwosa (2019) and Ullah e al. (2021) suppo he
posi i e ela ionship be ween popula ion size and income inequali y.
The ela ionship be ween economic g ow h and income inequali y in A ican coun ies,
including Sou h A ica, has been he subjec o a ious s udies on he Kuzne s cu e. The
Kuzne s hypo hesis, which sugges s an in e ed U-shape ela ionship be ween economic
g ow h and income inequali y, has been challenged in se e al empi ical s udies. These
s udies ejec ed he hypo hesis because he da a used we e c oss-sec ional, meaning ha
he coun ies analyzed we e a di e en s ages o de elopmen . Fo example, Wahiba and
We iemmi (2014), Niyimbani a (2017), Nwosa (2019), Mdingi and Ho (2021), and Chude
and Chude (2022) e-e alua ed he ela ionship be ween income inequali y and economic
g ow h and ound ha a ia ions in income dis ibu ion a e mo e ela ed o coun y-speciﬁc
cha ac e is ics han da a compa abili y issues. In Sou h A ica, high income inequali y
has been shown o ha e a nega i e impac on long- e m economic g ow h (Mdingi and
Ho 2021). Niyimbani a (2017) ound ha in he Mpumalanga p o ince o Sou h A ica,
economic g ow h was associa ed wi h po e y educ ion bu did no signiﬁcan ly a ec
income inequali y, con a y o heo e ical expec a ions. Chude and Chude (2022) and
Nwosa (2019) ound no signiﬁcan e ec o income inequali y on economic g ow h in
Nige ia. Wahiba and We iemmi (2014) ound ha economic g ow h had a posi i e impac
on income inequali y in Tunisia. Zungu e al. (2021) disco e ed ha lowe g ow h is
associa ed wi h lowe income inequali y in he SADC egion. Despi e e o s o add ess
income inequali y h ough economic g ow h and edis ibu i e policies, Sou h A ica
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Economies 2024,12, 169
G oss sa ings has a signiﬁcan posi i e ela ionship wi h income inequali y, wi h a 1%
signiﬁcance le el. This means ha when households sa e mo e, i leads o an inc ease in
income inequali y. Da ku (2014) ound ha inc eased income inequali y esul s in inc eased
consump ion by indi iduals in all income g oups, leading o declining pe sonal sa ings
a es. Acco ding o Palley (2010), weal hy households sa e a highe pe cen age o hei
pe manen income han poo households, leading o disp opo iona e weal h accumula ion
and in es men e u ns and exace ba ing income inequali y. Simila ly, empi ical s udies
by Maaboudi e al. (2023) and T an e al. (2020) ound a posi i e ela ionship be ween
g oss sa ings and income inequali y. Howe e , s udies by Van Wyk and Kapingu a (2021),
Yildi im (2020), and Deniz and Oz u kle (2010) ound a nega i e ela ionship, while Halim
e al. (2016) ound no signiﬁcan associa ion be ween g oss sa ings and income inequali y.
The heo e ical s udies ha suppo hese ﬁndings a e Yun e al. (2023), F iedman (1957),
and Duesenbe y (1949). When applying he Rela i e Income Hypo hesis (Duesenbe y
1949) o his s udy, i is ound ha indi iduals wi h lowe incomes migh sa e less o
keep up wi h he consump ion pa e ns o weal hie indi iduals, leading o lowe weal h
accumula ion and highe income inequali y o e ime. On he o he hand, he Pe manen
Income Hypo hesis (F iedman 1957) sugges s ha weal hie households sa e mo e, leading
o as e weal h accumula ion han ha o poo e households, esul ing in inc easing income
inequali y. Yun e al. (2023) sugges ha policy in e en ion aimed a s abilizing income
can educe income inequali y by s abilizing consump ion pa e ns.
The ﬁndings indica ed ha he popula ion g ow h coe ﬁcien a 1% was s a is ically
signiﬁcan . As a esul , popula ion g ow h had a nega i e impac on income inequali y
o e ime. This sugges s ha as he popula ion inc eases, income inequali y is likely o also
inc ease. The po en ial posi i e impac o popula ion g ow h could be a ibu ed o he ac
ha i s a e esou ces do no inc ease in line wi h he popula ion, he alloca ion o social
p og ams, heal hca e, and educa ion may esul in ewe esou ces pe pe son. This could
s ain socie y and ul ima ely lead o a ise in income inequali y. The e o e, hese esul s
a e consis en wi h o he s udies by Ullah e al. (2021), Nwosa (2019), Pe e son (2017), and
Anyanwu (2016), which ound ha popula ion g ow h in he long- e m leads o inc eases
in income inequali y. In an ideal scena io, an inc easing popula ion can lead o mo e
en ep eneu ial ac i i y, job c ea ion, and o e all economic g ow h. Howe e , in Sou h
A ica, se e al ac o s complica e hese ela ionships. Issues such as s uc u al inequali y,
limi ed access o educa ion and esou ces, egula o y ba ie s, and economic ins abili y
can hinde en ep eneu ial e o s and business g ow h. His o ical di e ences in Sou h
A ica, including he impac o apa heid, ha e esul ed in pe sis en economic inequali y
ha disp opo iona ely a ec s ma ginalized communi ies. High unemploymen a es, skill
sho ages, and inadequa e in as uc u e u he impede he de elopmen o en ep eneu s
and economic expansion. Add essing hese undamen al p oblems is c ucial o c ea ing a
conduci e en i onmen o en ep eneu ship and business g ow h while ha nessing he
po en ial beneﬁ s o a la ge popula ion. While social subsidies a e essen ial in add essing
immedia e challenges o po e y and income inequali y, long- e m sus ainable solu ions
mus ocus on encou aging inclusi e economic g ow h and empowe ing indi iduals and
communi ies o pa icipa e meaning ully in he economy. To achie e his, a comp ehensi e
app oach is needed o add ess bo h he supply-side cons ain s acing businesses and he
b oade socio-economic ac o s ha con ibu e o inequali y and exclusion. P io i izing
policies ha suppo en ep eneu s and economic empowe men can help Sou h A ica
c ea e a mo e equi able and p ospe ous socie y o all ci izens. Policymake s may need o
e-e alua e popula ion- ela ed policies like immig a ion, amily planning, and esou ce
alloca ion s a egies. Add essing he po en ial nega i e impac o popula ion g ow h on
income dis ibu ion necessi a es a holis ic app oach ha accoun s o demog aphic ends
and social policy amewo ks.
This s udy’s ﬁndings show ha annual GDP g ow h a es ha e a posi i e impac
on income inequali y in he long e m. The commonly held iew ha economic g ow h
au oma ically leads o imp o ed income dis ibu ion is no always ue in mos de eloping
38

Economies 2024,12, 169
coun ies, including Sou h A ica. This indica es ha he ela ionship be ween economic
g ow h and income inequali y is mo e complex and can a y depending on a ious ac o s,
such as policy in e en ions and labo ma ke dynamics. This is consis en wi h a s udy by
Wahiba and We iemmi (2014) ha also ound a posi i e ela ionship. Empi ical s udies by
Mdingi and Ho (2021), Nambie e al. (2023), Jianu e al. (2021), Vo e al. (2019), Royuela
e al. (2019), and Ca aballo e al. (2017) ound a nega i e ela ionship be ween economic
g ow h and income inequali y. Chude and Chude (2022), Nwosa (2019), and Niyimbani a
(2017) ound no signiﬁcan e ec o income inequali y on economic g ow h con a y o
heo e ical expec a ions.
The dummy a iable ep esen ing economic c ises shows a nega i e ela ionship
wi h income inequali y. This means ha in he long- un equa ion o he VECM, he
dummy a iable has a nega i e and signiﬁcan impac on income inequali y in Sou h A ica,
pa icula ly cap u ing he global ﬁnancial c isis. This s udy’s signiﬁcan e o co ec ion
e m o
−
0.063277, which alls be ween ze o and nega i e, indica es a s able long- un
equilib ium. The nega i e e o co ec ion e m also sugges s a s able and s a is ically
signiﬁcan coin eg a ion ela ionship. Policymake s may need o econside he connec ion
be ween economic g ow h and income dis ibu ion, ocusing on inclusi e g ow h s a egies
ha p io i ize equi able weal h dis ibu ion. This ﬁnding unde sco es he impo ance o
a ge ed in e en ions o ensu e ha economic p ospe i y beneﬁ s all membe s o socie y.
4.6. Robus ness Check
Pe o ming diagnos ic es s is an essen ial pa o his s udy since i indica es whe he
o no he e is an issue wi h he model’s es ima ion. I an issue is ound, i indica es ha he
model is ine ﬁcien , which may also imply ha he ﬁndings a e skewed (Woold idge 2001).
Tes s o no mali y, he e oscedas ici y, and se ial co ela ion we e among he diagnos ic
p ocedu es ca ied ou o de e mine whe he he model u ilized in his in es iga ion
easonably ﬁ s he da a. The esul s o he diagnos ic es s conduc ed o his s udy indica e
ha he model is qui e well desc ibed. Table 6 shows ha he esiduals ha e a combined
p obabili y o he Ja que–Be a o 0.1107 and a e no mally dis ibu ed. The likelihood o
0.5015 o LM-S a indica es ha he esiduals a e no se ially co ela ed. Fu he mo e,
no he e oskedas ici y has been disco e ed, as shown by a join Chi-squa e p obabili y
o 0.5603.
Table 6. Diagnos ic es s.
Tes Null Hypo hesis -S a is ics P obabili y
Ja que–Be a (JB) The e is a no mal
dis ibu ion 4.401542 0.1107
Lang age Mul iplie (LM) No se ial co ela ion 45.54572 0.5015
Whi e (CH-sq) No condi ional
he e oskedas ici y 33.09478 0.5603
5. Conclusion and Recommenda ions
This s udy concludes by summa izing ﬁndings, p o iding ecommenda ions, and
ou lining limi a ions in Sec ions 5.1–5.3.
5.1. Conclusions
Sou h A ica has been s uggling wi h he issue o income inequali y o a long ime,
e en be o e he onse o democ acy. Acco ding o he widely accep ed measu e o global
inequali y, he Gini index, Sou h A ica has he highes income inequali y in he wo ld.
Despi e implemen ing policies and amewo ks, Sou h A ica has seen a ise in income
inequali y, which has a p o ound impac on socie y. The pu pose o his s udy was o
analyze he ela ionship be ween speciﬁc economic indica o s in Sou h A ica using he
Vec o E o Co ec ion Model (VECM) on income inequali y. This is undamen al because
39
Economies 2024,12, 169
assessing he ac o s con ibu ing o income inequali y assis s in ﬁnding app op ia e mea-
su es o mi iga e i . By e alua ing go e nmen spending on social g an s, g oss sa ings,
popula ion g ow h, economic g ow h, and he dummy a iable o cap u e economic c ises,
his s udy sheds ligh on hei impac on income inequali y om 1975 o 2017 in he Sou h
A ican con ex .
This s udy e ealed ha go e nmen spending on social g an s has a nega i e impac
on income inequali y. This means ha as go e nmen spending on social g an s inc eases,
income inequali y is expec ed o dec ease in he long e m. Addi ionally, his s udy ound
ha g oss sa ings ha e a posi i e impac on income inequali y, wi h a signiﬁcance o
1%. This sugges s ha weal hie households end o sa e a highe pe cen age o hei
pe manen income compa ed o poo e households, leading o disp opo iona e weal h ac-
cumula ion and exace ba ing income inequali y. Fu he mo e, his s udy’s esul s indica ed
ha economic g ow h has a posi i e impac on income inequali y in he long un. How-
e e , i is wo h no ing ha economic g ow h does no always lead o imp o ed income
dis ibu ion in de eloping coun ies like Sou h A ica, as he ela ionship is inﬂuenced by
ac o s such as policy in e en ions and labo ma ke dynamics. Mo eo e , popula ion
g ow h is s a is ically signiﬁcan a 1% and posi i ely impac s income inequali y in he long
e m. This implies ha an inc ease in popula ion o e ime can lead o a su ge in income
inequali y. Howe e , i is impo an o ecognize ha popula ion g ow h can also s imula e
en ep eneu ship, c ea e job oppo uni ies, and con ibu e o o e all economic de elop-
men . In he long un, he dummy a iable ep esen ing economic c ises demons a es a
nega i e and signiﬁcan ela ionship wi h income inequali y in Sou h A ica. This sugges s
ha i has a no able impac on income inequali y, pa icula ly in he con ex o cap u ing
he global ﬁnancial c isis.
The esul s o his s udy add o he exis ing li e a u e on he ela ionship be ween
go e nmen spending, g oss sa ings, popula ion g ow h, economic g ow h, and income
inequali y. The ﬁndings highligh he impo ance o go e nmen spending on social g an s
and he nega i e impac o g oss sa ings on income inequali y. These ﬁndings can in o m
policy decisions o educe income inequali y in Sou h A ica. To ackle he p essing p oblem
o income inequali y, policymake s a e ad ised o adop a e sa ile app oach ha includes
policies aimed a economic g ow h and equi able income dis ibu ion. Such measu es
may include boos ing go e nmen spending on social wel a e p og ams and e amping
social secu i y policies, bo h o which ha e shown o be e ec i e in add essing income
inequali y. In a Sou h A ican con ex , a p ime example was he success ul implemen a ion
o he social elie o dis ess g an du ing he COVID-19 pandemic. Al hough inc easing
spending on social wel a e p og ams can help o educe po e y and income inequali y in
he sho e m, he e a e some po en ial disad an ages o conside . Fo ins ance, elying oo
hea ily on social g an s wi hou implemen ing measu es o p omo e economic g ow h and
employmen could lead o dependency ins ead o encou aging sel - eliance. In addi ion,
ine ﬁcien adminis a ion and co up ion can unde mine he e ec i eness o social wel a e
p og ams, esul ing in misalloca ed esou ces and wo sening income inequali ies.
This s udy’s ﬁndings emphasize he signiﬁcance o sa ings and economic g ow h in
add essing income inequali y. Encou aging people o sa e and in es can lead o economic
g ow h and c ea e oppo uni ies o accumula ing weal h. Policies ha incen i ize sa ing
beha io , such as ax b eaks and ax- ee in es men incen i es, can e ec i ely p omo e
hese endea o s wi hou ad e sely a ec ing go e nmen income. Fu he mo e, implemen -
ing policies o s eng hen economic g ow h, such as in as uc u e de elopmen , inno a ion
incen i es, and ade acili a ion, can s imula e job c ea ion and income gene a ion. Sup-
po ing small and medium-sized en e p ises (SMEs) and en ep eneu ship can also os e
inclusi e economic g ow h.
In addi ion, in es ing in popula ion p og ams, including amily planning ini ia i es
and ep oduc i e heal h se ices, can e ec i ely manage popula ion g ow h, he e o e
leading o less go e nmen spending on social g an s. By empowe ing indi iduals o make
in o med choices abou amily planning, hese p og ams can posi i ely impac income
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Economies 2024,12, 169
inequali y by encou aging smalle amily sizes. This, in u n, educes p essu e on esou ces
and p omo es economic de elopmen .
5.2. Recommenda ions
This s udy’s ﬁndings highligh he impo ance o balancing indi idual sa ing beha -
io s wi h b oade socio-economic goals, which can po en ially inﬂuence ﬁnancial egula ion
and social wel a e policies.
The ollowing ecommenda ions a e made based on he esul s o his s udy:
1.
This s udy p oposes implemen ing s a egies o cu b income inequali y, including
inc easing go e nmen spending on social wel a e p og ams and e o ming social
secu i y policies. These measu es ha e been demons a ed o be e ec i e in mi iga ing
income dispa i ies, as exempliﬁed by he success o he social elie o dis ess g an
implemen ed du ing he COVID-19 pandemic in Sou h A ica.
2.
Policymake s a e encou aged o add ess he undamen al causes o income inequali y,
acknowledging he essen ial ole o labo supply and job c ea ion in alle ia ing income
inequali y; policies should ocus on employmen expansion. Ini ia i es such as skill
de elopmen p og ams can enhance he wo k o ce’s employabili y.
3.
To balance popula ion g ow h wi h inclusi e economic de elopmen , policymake s
a e encou aged o de elop policies ha s imula e job c ea ion and economic oppo -
uni ies in egions expe iencing apid popula ion g ow h. This should also os e
an en i onmen conduci e o en ep eneu ship and small business de elopmen o
abso b he g owing wo k o ce and minimize he exace ba ion o income inequali y
o e he long e m.
4.
This s udy highligh s he impo ance o policies gea ed owa ds imp o ing g oss
sa ings. Encou aging a cul u e o sa ing and implemen ing incen i es o indi iduals
and businesses by he go e nmen can con ibu e o economic s abili y and esilience
in he long e m.
5.3. Limi a ions o This S udy and Recommenda ion o Fu u e S udies
This s udy had some limi a ions due o a sho age o ele an da a and ma e ials. This
s udy is es ic ed o a speciﬁc ime ame because o he a ailabili y o da a. The s udy
pe iod is om 1975 o 2017, which means ha he e is a ﬁ e-yea ime lag in e ms o he
da a since his s udy concluded in 2023. The unemploymen da a we e no included in he
model due o he me hodological cons ain s o he Vec o E o Co ec ion Model (VECM)
and da a limi a ions. The unemploymen a e da a a e conside ed o be in eg a ed as o de
ze o (I(0)), indica ing ha i is al eady s a iona y. On he o he hand, o he Vec o E o
Co ec ion Model (VECM) o es ablish coin eg a ing ela ionships, all a iables need o be
in eg a ed as o de one (I(1)). I an I(0) a iable is included in a VECM, i can esul in model
misspeciﬁca ion and un eliable esul s. The nea singula ma ix e o occu ed when he
lagged Gini coe ﬁcien was in oduced, indica ing pe ec collinea i y. This means ha he
lagged Gini coe ﬁcien was highly co ela ed wi h he cu en Gini coe ﬁcien , making i
edundan in he model. Including pe ec ly collinea a iables iola es he assump ions
o he VECM and can lead o uns able es ima es. Fu he mo e, despi e se e al e o s ha
we e made o collec ele an da a om di e en sou ces, his s udy is cons ained due o
he limi ed amoun o da a on income inequali y in Sou h A ica. I is ecommended ha :
•
Fu u e esea ch s udies should in es iga e whe he he esul s o his s udy would
a y i he income inequali y da a we e a ailable o e a mo e ex ended pe iod.
•
Also, u u e esea ch could inco po a e di e en ca ego ies o social ans e s as sepa a e
a iables, enabling a mo e nuanced examina ion o hei e ec s on income inequali y.
Au ho Con ibu ions:
Concep ualiza ion, M.S. and K.O.; me hodology, M.S.; alida ion, M.E., K.O.
and M.S.; o mal analysis, M.S.; in es iga ion, M.S. and M.E.; da a cu a ion, M.E.; w i ing—o iginal
d a p epa a ion, M.S. and K.O.; w i ing— e iew and edi ing, M.S., K.O. and M.E.; isualiza ion,
M.E.; supe ision, K.O. All au ho s ha e ead and ag eed o he published e sion o he manusc ip .
41
Economies 2024,12, 169
Funding:
This esea ch ecei ed no ex e nal unding, and he APC was unded by he Uni e si y o
Mpumalanga, Sou h A ica.
In o med Consen S a emen : No applicable.
Da a A ailabili y S a emen : A ailable on eques .
Conﬂic s o In e es : The au ho s decla e no conﬂic o in e es .
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44
Ci a ion: Seip, Knu Leh e, and F ode
Eika Sandnes. 2024. The Timing and
S eng h o Inequali y Conce ns in
he UK Public Deba e: Google T ends,
Elec ions and he Mac oeconomy.
Economies 12: 135. h ps://doi.o g/
10.3390/economies12060135
Academic Edi o : Fabio Clemen i
Recei ed: 3 Ap il 2024
Re ised: 2 May 2024
Accep ed: 21 May 2024
Published: 30 May 2024
Copy igh : © 2024 by he au ho s.
Licensee MDPI, Basel, Swi ze land.
This a icle is an open access a icle
dis ibu ed unde he e ms and
condi ions o he C ea i e Commons
A ibu ion (CC BY) license (h ps://
c ea i ecommons.o g/licenses/by/
4.0/).
economies
A icle
The Timing and S eng h o Inequali y Conce ns in he UK
Public Deba e: Google T ends, Elec ions and he Mac oeconomy
Knu Leh e Seip 1,* and F ode Eika Sandnes 2
1Facul y o Technology, A and Design, Oslo Me opoli an Uni e si y, P.O. Box 4, S . Ola s Plass,
Piles ede Pa k 33, 0176 Oslo, No way
2Depa men o Compu e Science, Oslo Me opoli an Uni e si y, 0167 Oslo, No way; [email p o ec ed]
*Co espondence: knu .leh [email p o ec ed]
Abs ac :
Inequali y among people has se e al unwan ed e ec s, in humanis ic, social and economic
con ex s. Se e al s udies add ess dis ibu ional p e e ences among g oups, bu li le is known abou
when inequali y issues a e ocused and when and why inequali y aba emen measu es a e b ough
on he poli ical agenda. We show ha du ing he pe iod 2004 o 2023, inequali y issues we e ocused
du ing elec ions o he EU and UK pa liamen and wi h g ea es s eng h du ing he elec ions o he
EU pa liamen in May 2004 and o he UK pa liamen in May 2015. Pe iods wi h high unemploymen
and inﬂa ion cause he discussion on inequali y o be ollowed by discussions on inequali y measu es.
Howe e , when he discussion o inequali y is ollowed e y closely by he discussions o aba emen
measu es, inequali y a e sion becomes mo e s ongly associa ed wi h he mac oeconomic a iables
inﬂa ion and GDP ( ecessions) han wi h unemploymen and mo e s ongly associa ed wi h he
conce ns o ai ness han conce ns wi h wa and c ime. The esul s we e ob ained examining Google
T ends and schola ly s udies.
Keywo ds:
inequali y; aba emen measu es; Uni ed Kingdom; Google T ends; pa liamen elec ions;
ecessions; unemploymen ; inﬂa ion
1. In oduc ion
Inequali y (INE) among people wi hin coun ies and wo ldwide has been hypo he-
sized o cause poli ical ins abili y, e.g., Roe and Siegel (2011), dec ease economic g ow h,
e.g., Michalek and Vybos ok (2019), and con as wi h wha people ega d as mo ally igh ,
Röze e al. (2022). Peoples’ pe cep ion o inequali y o pay has also been ound o be
s ongly connec ed o hei poli ical s andpoin (B a ano a e al. 2016; Fisman e al. 2017;
Sandnes e al. 2023). Howe e , Hoy e al. (2024, da a om Aus alia) show ha he opinions
o igh -leaning o e s change when misconcep ions a e co ec ed. A popula su ey o
ela ions be ween inequali y and popula ion “spi i ” is gi en in Wilkinson and Picke
(2010, da a sou ces pp. 280–83). Th ee se s o ques ions wi h ega d inequali y can be
dis inguished: A ﬁ s se add esses he ac o s ha con ibu e o inc easing o dec easing
inequali y. A second se add esses which o hese ac o s a e he esul o economic policy
o s abilize he economy, and which ac o s can be managed di ec ly o add ess inequali y,
e.g., Malla and Pa h ana akul (2022). The hi d se add esses he ype o inequali y conce ns
exp essed by low-, middle- and high-income popula ions. Mos o he cu en li e a u e on
inequali y appea s o add ess he conce ns exp essed by he low-income popula ion.
Recen ly, Google T ends ha e been used o iden i y people’s sen imen s in he public
con e sa ion abou impo an issues. Fo example, Timoneda and Wibbels (2022, pp. 3–6)
discussed he use o Google T ends and examined he equency o “p o es s” using Google
T ends. Conno e al. (2019) sea ched o links be ween “inequali y” and “ acial-bias”
bu ound no conclusi e e idence o such a link. He e, we examine i he wo issues,
“inequali y” (INE) and “inequali y measu es” (IMEs), we e ela ed o pa icula e en s o
Economies 2024,12, 135. h ps://doi.o g/10.3390/economies12060135 h ps://www.mdpi.com/jou nal/economies
45
Economies 2024,12, 135
mac oeconomic economic s a es in he Uni ed Kingdom (UK). The UK was chosen because
i anks among he highes in Eu ope in e ms o income inequali y (Be isha e al. 2021),
and Filippin and Nunzia a (2019, p. 116) include he UK among he high-inequali y clus e
o Eu opean s a es.
We de eloped h ee hypo heses.
Hypo heses. We hypo hesized ha
Hypo hesis 1 (H1).
Con e sa ions abou INE and measu es o educe inequali y, IME, would
be pa icula ly s ong a ound elec ions o he UK and he Eu opean union (EU) pa liamen s. The
aa ionale is ha when inequali y becomes a ocused issue in he public con e sa ion, he need o
measu es o aba e inequali y will be s onge and he e o e ollow in s eng h in he con e sa ion.
Fo example, Fisman e al. (2017) a gues ha edis ibu ion e sus an icipa ed GDP g ow h was
an impo an issue du ing he US p esiden ial elec ion in 2012. We e alua e he hypo hesis by
iden i ying ime windows in Google T ends se ies whe e equencies a e la ge han one hal he
se ies’ a e age equency; in he ollowing, hese a e deno ed by INE+ and IME+. The echnique o
iden i ying windows in ime se ies whe e alues ha a e highe and lowe han he a e age alue is
common in clima e esea ch; e.g., Gong e al. (2020).
Second, we hypo hesized ha
Hypo hesis 2 (H2).
INE would be leading IME du ing un a o able economic condi ions. Such
pe iods could be pe iods wi h high unemploymen (UE), high inﬂa ion (INF) and low cen al
bank in e es a e (CBI). CBI is low when he economy is unde pe o ming. We e alua e his
hypo hesis by (i) applying a high- esolu ion lead-lag me hod (HRLL) o pai ed Google ime se ies
and (ii) embedding he LL ela ions in a p incipal componen analysis (PCA) “map” o he UK
economy. This allows us o iden i y which economic condi ions a e associa ed wi h a leading ela ion
o INE o IME, ha is, om inequali y discussions o inequali y aba emen measu es.
Thi d, we hypo hesized ha
Hypo hesis 3 (H3).
A majo eason o conﬂic s ela ed o inequali y would be “ ai ness” issues.
We e alua ed his hypo hesis by compa ing Google T ends se ies o “inequali y” wi h T ends se ies
o “ ai ness”. I he wo se ies should co ela e, ai ness is an impo an a ibu e o inequali y.
Since he poli ical e en s associa ed wi h a pa liamen elec ion las o a ela i ely
sho pe iod, whe eas economic changes ypically las o he leng h o economic business
cycle imes, e.g., 4–8 yea s (Bu ns and Mi chell 1946), we disen angle he ime se ies in o a
high- equency, apid componen and a low- equency, slow componen .
We ﬁnd ha inequali y in he UK is in ocus du ing pa liamen elec ions, and du ing
pe iods wi h ecessions and inﬂa ions, mo e han wi h pe iods o unemploymen . Inequali y
is mo e s ongly associa ed wi h ai ness han wi h c ime and wa .
The p esen s udy dis inguishes i sel om mos o he s udies in ha i iden iﬁes ime
windows du ing he economic and social de elopmen o a single coun y, he UK, whe eas
mos o he s udies ﬁnd pa e ns in inequali y by s udying and compa ing inequali y among
se e al coun ies. We use a high- esolu ion lead-lag me hod (HRLL) ha allows us o
s eng hen he causal in e e ences o e wha co ela ion alone would suppo . HRLLs
a e calcula ed o e sho ime pe iods (3 mon hs and 9 mon hs a e su ﬁcien o es ablish
signiﬁcance). Fu he mo e, we add con ex o ou esul s by making a PCA sco e plo o
he UK economy om 2004 o 2023 based on ﬁ e mac oeconomic a iables.
The es o he manusc ip is o ganized as ollows. Sec ion 2 p esen s he ime se ies
used. Sec ion 3 desc ibes he me hods, wi h emphasis on a high- esolu ion lead-lag (HRLL)
me hod. Sec ion 4 shows he esul s, and Sec ion 5 discusses he esul s. Sec ion 6 p esen s
concluding ema ks.
46
Economies 2024,12, 135
2. Da a
We used Google T ends h ps:// ends.google.com/ ends/?geo=NO, accessed on
5 Janua y 2024. F om ha da abase, we e ie ed ime se ies o he equency o he e ms
“inequali y”, “poo ” and “ ich” o he pe iod 2004 o 2024. We used he colloquial e ms
“poo ” and “ ich” ins ead o low- and high-income people because he second se o e ms
did no ha e enough da a o cons uc meaning ul ime se ies. We e ie ed ime se ies
o “conﬂic ”, “poli ical conﬂic ” and “inequali y measu es” o exp ess possible esul s
o inequali y on conﬂic s and aba emen measu es. We used he exp ession “Inequali y
measu es” despi e i s ela i ely low o e all sco es because we hen could examine i
“inequali y” would lead o he discussion o “inequali y measu es”. We also ied se e al
o he exp essions o inequali y measu es, bu none yielded enough da a o cons uc
meaning ul ime se ies. To pu ou esul s in o an economic con ex o he UK, we
used da a on unemploymen (UE), mone a y supply (M1), inﬂa ion (INF) and indus ial
p oduc ion (IP). The da a we e ex ac ed om S . Louis Fede al Rese e in 5 Janua y 2024
(h ps:// ed.s louis ed.o g/). Da a o UK and EU pa liamen elec ions we e downloaded
om o ﬁcial go e nmen al websi es. The e we e eigh elec ion da es: Oc obe 2004 (EU
elec ion), May 2005 (UK elec ion), June 2009 (EU-elec ion) 2010 May (UK elec ion), May
2015 (UK elec ion), June 2017 (UK elec ion), May 2019 (EU elec ion), Decembe 2019 (UK
elec ion). The UK le he EU on 31 Janua y 2020. We e ie ed an index o inequali y,
he Gini’s index om h ps:// ed.s louis ed.o g/se ies/SIPOVGINIGBR and om h ps:
//www.s a is a.com/s a is ics/872472/gini-index-o - he-uni ed-kingdom/, he la e o
ﬁnd he mos ecen sco es. Bo h da a sou ces we e e ie ed on 5 Janua y 2024. The Gini
index is an economic equali y sco e calcula ed o all coun ies in he wo ld by he Wo ld
Bank (h ps://da a.wo ldbank.o g/indica o /SI.POV.GINI, accessed on 5 Janua y 2024).
Da a o conce ns ela ed o inequali y we e e ie ed om Google T ends, Google Schola
and Web o Science.
3. Me hodology
In his sec ion, we ﬁ s disen angle he Google T ends ime se ies in o sho - e m and
long- e m componen s based on powe spec al densi y (PSD) esul s o he Google se ies.
We hen explain how he se ies a e de ended and smoo hed o ex ac he ea u es o
in e es . The ea e we explain b ieﬂy he high- esolu ion lead-lag HRLL me hod used in
he s udy, cycle pe iods (CP) and phase shi s (PS). Fou h, we b ieﬂy explain how we use
some algo i hms ha a e common in se e al s a is ical so wa e packages.
3.1. Da a P ep ocessing
We disen angled he ime se ies by iden i ying ime se ies’ componen s using LOESS
smoo hing. The LOESS smoo hing algo i hm has wo pa ame e s. The pa ame e ( ) is he
ac ion o he ime se ies ha is used as a mo ing window, and he pa ame e (p) is he
o de o he polynomial equa ion used o in e pola e he se ies. Because we always use
p=2
, we use he nomencla u e LOESS( ) o iden i y he smoo hing deg ee in he es o he
manusc ip . We LOESS(0.4)-smoo hed he aw ime se ies o iden i y he low- equency
ime se ies and sub ac ed he low- equency ime se ies om he aw ime se ies o iden i y
he high- equency ime se ies. To emo e high- equency noise om he high- equency
se ies, we, in addi ion, used LOESS(0.2) o smoo h he se ies.
3.2. Sco ing Time Se ies E en s
To calcula e sco es, we iden iﬁed he numbe o mon hs du ing he wo ecessions and
du ing he eigh elec ions whe e (i) “inequali y” and (ii) “inequali y measu es” showed
high equency and (iii) whe e “inequali y” was leading “inequali y measu es”. Recessions
las ed 16 and 6 mon hs, espec i ely, and he elec ion pe iods we e deﬁned as 2 mon hs
be o e and 1 mon h a e he elec ion mon h. This is he same ime window as Timoneda
and Wibbels (2022) use be o e and a e a “p o es ” mon h.
47
Economies 2024,12, 135
Figu e 5.
Uni ed Kingdom economy and elec ions o EU and UK pa liamen s. (
a
) Mac oeconomic
ime se ies cen e ed and no malized o uni s anda d de ia ion. (
b
) PCA loading plo o UK economy
desc ibed by he ﬁ e ime se ies in (
a
). (
c
) PCA sco e plo o UK economy. Red lines show when
“inequali y” (INE) leads “inequali y measu es” (IME) wi h high- equency ime se ies. (
d
) PCA sco e
plo o UK economy. Red lines show whe e INE leads IME wi h low- equency ime se ies. (
e
) Same
as (
c
), bu he leading ela ion is s ongly es ablished, LL(INE,IME) >0.9 ( ange 0–1.0), (
) Same as
(
d
), bu he lead ime be ween INE and IME is sho . ( ange 0–100 mon hs). UE = unemploymen ,
M1 = mone a y supply, INF = inﬂa ion exp essed as consume p ice index, CBI = cen al banks
sho - e m in e es a e. Blue do s a e elec ions in UK o he UK o EU pa liamen s. Yellow do s show
he beginnings o ecessions 2008 and 2020.
The PCA plo s o he UK economy a e shown as a loading plo in Figu e 5b and as
sco e plo s in Figu e 5c– . The PCA sco e and loading plo s a e in e p e ed as ollows: The
posi ion o an obse a ion in a sco e plo (in ou case, he s a e o he UK economy a a
ce ain yea ) is associa ed wi h he posi ion o he explana o y a iables in he loading plo
(in ou case, he alues o he ﬁ e mac oeconomic a iables). Blue do s show pa liamen
elec ions and yellow do s show ecessions. The loading plo shows ha he ime se ies o
he ﬁ e ime se ies ma ches a adi ional pa e n o an economy.
Fo example, unemploymen (UE) a ies in e sely o indus ial p oduc ion (IP), as i
should acco ding o Okun’s law, e.g., Maza (2022), Seip and Zhang (2022).
High- equency esul s. The ed lines in he le sco e plo s in Figu e 5c,e show he ime
windows whe e he high- equency INE is a leading a iable o he high- equency IME.
The g aph in Figu e 5d shows esul s when LL ela ions a e posi i e (>0; ange
−
1 o
+1), and he g aph in Figu e 5c shows esul s when LL ela ions a e g ea e han 0.9, ha is,
he equi emen o pe sis en ly igh e ela ions be ween INE and IME is s eng hened.
Visually, he plo sugges s ha INE leads IME du ing pe iods jus be o e, du ing o jus
a e an elec ion e en , and he igh e equi emen emphasizes he ecession and elec ions
du ing he yea s 2004 o 2008.
Low- equency esul s. Figu e 5d, show sco es whe e he low- equency INE leads
he low- equency IME. The g aph in Figu e 5d shows he esul when LL ela ions a e
posi i e, bu o he g aph in , we ha e added he es ic ion ha he lead ime be ween
INE and IME should be less han 20 mon hs ( ange 0 o 100 mon hs). The ed cu es in
he uppe igh pa o Figu e 5d co esponds o s a es whe e INF, CBI and M1 ha e high
alues. (M1 is a echnical a iable exp essing he amoun o money in he socie y.)
54

Economies 2024,12, 135
High alues o M1 and CBI sugges ha he Bank o England ies o slow down he
economy o educe INF. The ed cu e in he uppe le pa co esponds o economic s a es
whe e UE is high.
The g aph in Figu e 5 wi h he igh e equi emen be ween INE and IME shows ha
he yea s om 2004 o 2008 a e emphasized oge he wi h he ime a e he UK le he
EU and he inﬂa ion pe iod a e he pandemic. The pe iod 2011–2014 wi h high UE is no
longe ma ked as an impo an e en o discussing inequali y issues. Figu e 5c– show
ha inequali y conce ns we e less p onounced du ing he ac ual pandemic in 2020 han
du ing he ollowing inﬂa ion pe iod up o 2023.
4.3. Inequali y Conce ns
Figu e 6 shows wo g aphs ha iden i y conce ns ha can be ela ed o inequali y. The
ﬁ s g aph is based on he wo ldwide use o he conce n e ms—“ ai ness”, “GDP g ow h”,
“c ime” and “wa ”—in Google T ends, Google Schola and he Web o Science. The second
g aph shows a PCA plo o he ﬁ e Google T ends se ies: inequali y and he ou conce n
e ms in he UK.
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Figu e 6.
Conce ns o he e ec s o inequali y. (
a
) Conce ns wo ldwide. “T ends” is Google T ends;
“Schola ” is numbe o esul s in Google Schola ; “WoS” is numbe o esul s in Web o Science.
(
b
) Google T ends 2004 o 2022. Co-mo emen be ween “inequali y” and “c ime”, “ ai ness”, “GDP
g ow h” and “wa ”.
5. Discussion
We ﬁ s ou line he gene al economic his o y o he UK. We he ea e discuss when
he equency o inequali y conce ns is high. Thi d, we discuss he esul s ha show
when discussions on inequali y a e ollowed by discussions on inequali y aba emen
measu es, exp essed by a posi i e lead-lag ela ion LL(INE, IME) alue. Fou h, we
examine he possible consequences o inequali y, such as sen imen s o un ai ness in he
UK popula ion and inc eases in c ime. Las , we discuss he use o Google T ends and he
HRLL me hodology.
5.1. UK Economic His o y 2008–2023
A ough, s ylized ske ch o he UK economic his o y can be ead by compa ing
ajec o ies in he PCA “map”, Figu e 5c– , wi h he posi ion o he mac oeconomic a iables
in Figu e 5b.
55
Economies 2024,12, 135
As ajec o ies in he panels o Figu e 5c– mo e owa ds he posi ion o an ac onym
in panel Figu e 5b, he a iables ep esen ed by ha ac onym inc ease in impo ance o
he UK economy.
Following he ab up beginning o he ecession in 2008, he economy, IP, slowed down
and UE inc eased un il 2012–2013, hen UE ell, and IP g ew un il he COVID-19 pandemic
ecession in 2020. Following ha ecession (and he UK lea ing he EU), INF ose apidly
un il 2022 and hen slowed down in abou he same phase un il he p esen .
I is in e es ing ha comba ing he 2008 and he 2020 ecessions esul ed in qui e di -
e en ajec o ies. The ajec o y ollowing he 2008 ecession esul ed in high UE, whe eas
he ajec o ies ollowing he 2020 ecession and pandemic esul ed in high INF. Howe e ,
he wo ecessions we e handled di e en ly using di e en mone a y and ﬁscal policies.
5.2. High-In ensi y Discussions o Inequali y Issues
In e es in inequali y, exp essed as he ela i e equency o he sea ch e ms “inequal-
i y”, “poo ” and “ ich” as epo ed by Google T ends, we e shown in Figu e 2. The e m
“INE” declines be o e he ecession bu inc eases a e he ecession in 2008 o 6 o 9 mon hs.
The eason may be ha he e is an inc ease in employmen be o e a ecession bu a “jobless
eco e y” a e he ecession (Seip and Zhang 2022). INE is on p eponde ance o p obabili y
o be e associa ed wi h elec ions o he EU and UK pa liamen s o e sho - e m ime
spans
≈
24 mon hs. “P eponde ance o p obabili y” he e means ha “inequali y” and
“inequali y measu es” a e men ioned wi h highe equency han he a e age du ing all
4 mon hs a ound an elec ion. The e m IME was only associa ed wi h UK elec ions. Ou
hypo hesis, H1, was he e o e only pa ly suppo ed; bo h INE and IME we e used mo e
equen ly han expec ed ( andom) du ing EU and UK elec ions. Howe e , IME was used
less han INE, and he e ms we e no used pe sis en ly du ing all eigh elec ion e en s.
Inequali y and i s aba emen measu es we e discussed mos consis en ly du ing he EU
elec ions in Oc obe 2004 and he UK elec ions in May 2005 (black EU and UK columns in
Figu e 4).
5.3. Lead-Lag Rela ions
The e m INE was leading IME du ing elec ions bo h o he EU and he UK pa liamen
o e sho ime spans. By embedding he esul s in he “map” o he UK economy, i is seen
ha INE leads IME bo h du ing elec ions and du ing he ecessions in 2008 and in 2020.
O e he low- equency ime spans,
≈
72 mon hs, he economic “map” showed ha INE
was leading IME du ing pe iods wi h high unemploymen and high inﬂa ion and du ing
ecessions. Requi ing ha he LL ela ions be ween INE and IME a e igh , he in ensi y
o inequali y con e sa ions a ound he 2008 ecession and he inﬂa ion pe iod a e he
COVID-19 pandemic we e emphasized. Two easons may be impo an : (i) he e is an
inc eased u gency o achie e inequali y aba emen measu es, o (ii) he d i ing o ce mus
las o some ime (>20 mon hs), co esponding o he cu o alue o he ime be ween
high INE and IME equencies. Thus, ou hypo heses H2 was suppo ed—a leading ole
o INE o IME is ela ed o poli ical e en s, ha is, ei he o elec ions o he UK o he
EU pa liamen s o o ha m ul economic condi ions exp essed by unemploymen and
inﬂa ion. Fo all e ms, we ied se e al synonyms, bu all al e na i es ailed o p oduce
su ﬁcien da a.
5.4. Inequali y Conce ns and Inequali y Aba emen Measu es
Inequali y conce ns add ess he e ec s o inequali y ha educe he quali y o li e o
he a ﬂuence o he socie y. Aba emen measu es add ess wha policies can be enac ed
o educe ei he “objec i e” inequali y, (e.g., exp essed by he Gini index) o “subjec i e”
inequali y. Lambe e al. (2003, p. 1073) and Da idescu e al. (2024) include mac oeconomic
a iables (GDP pe capi a) bu also socioeconomic a iables, such as public expendi u es
(schools) and gende policies, o explain subjec i e and eal inequali y conce ns.
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Economies 2024,12, 135
5.4.1. Inequali y Conce ns
The e a e wo dicho omies wi h espec o “inequali y”. One se is i he inequali y
conce ns ela e o socioeconomic s ess among he lowe income indi iduals o i i ela es
o a discussion o measu es o con ince he ich o con ibu e mo e o he wel a e sys em.
The o he se is i he ich ge iche by un ai means and luck o by me i . We belie e
ha conce ns o socioeconomic s ess would be dominan du ing ecessions and du ing
inﬂa ion e en s. Fu he mo e, discussions on s ess would p obably be mo e equen on
he in e ne , and discussion on how he ich could con ibu e mo e o wel a e economy
would p obably be mo e equen in epo s and go e nmen hea ing no es. Howe e , in
he UK, one could an icipa e ha discussion abou con ibu ions om he ich could be
equen du ing he P ime Minis e pe iod o he s ongly conse a i e Liz Tuss om 6
Sep embe o 25 Oc obe 2022, (Tosun and Lucey 2023), bu he e was no pa e n in he
Google T ends ha dis inguished he pe iod. To examine wha ype o conce ns a e mos
associa ed wi h inequali y, we ied o combine he e m “inequali y” wi h he conce n
e ms “ ai ness”, “GDP g ow h”, “c ime” and “wa ”, bu UK Google T ends jus epo ed
“no su ﬁcien da a”. Howe e , ime se ies we e success ully es ablished o he wo ld.
Figu e 6a showed a compa ison o he a e age equency o he conce n e ms in Google
T ends, Google Schola and Web o Science. The ﬁ s ela es o public con e sa ions, he
second o schola ly esea ch and discou ses and he hi d o scien iﬁc publica ions. The
conce n mos associa ed wi h inequali y wo ldwide was wa and, he ea e , c ime. This
holds o Google T ends, as well as o Google Schola . Fo he Web o Science, all ou
conce ns yielded simila esul s ( he ba s a e o equal heigh ).
Fo he conce n e ms in he UK (no pai ed wi h inequali y), we ob ained ull se ies
o all e ms. Compa ing he ime se ies o he ou e ms o he se ies o inequali y wi h a
PCA analysis, we ound ha he se ies o ai ness and GDP g ow h we e mos like he ime
se ies o inequali y, Figu e 6b. The o e all esul s indica e ha du ing elec ions, inequali y
gi es easons o discussions o aba emen measu es, and ai ness and GDP g ow h a e he
main conce ns du ing he discussions.
Fo he inequali y conce ns, like ai ness, GDP g ow h, c ime and wa , mos o he
a ailable li e a u e ga e in o ma ion ha was gene ic. The e ec s o inequali y on economic
g ow h we e s udied by Naguib (2015, p. 38 Appendix). The au ho examined coun ies
ha a e membe s o he O ganiza ion o Secu i y and Co-ope a ion in Eu ope (OSCE)
and ound a s a is ically signiﬁcan posi i e e ec om inequali y on GDP g ow h (a 1%
inc ease in inequali y ga e a 1.2–1.5% inc ease in GDP, and he UK is included in he
sample). In a model s udy, Lambe e al. (2003, pp. 1078, 1079) ound ha inequali y
a e sion inc eased wi h he g ow h a e un il i eached abou 2%, bu ha g ow h abo e
2% educed inequali y a e sion. I is no clea why i would no dec ease pe sis en ly wi h
g ow h a e. In economic e ms, he Gini index o op imal g ow h a e is 38.2%; Lambe
e al. (2003, Figu e 2; model s udy) ound i o be highe han he UK. Gini is 35.3
±
1.2
o he pe iod 2004 o 2020. Kelly (2000, p. 533) ound ha inequali y had a s ong and
obus impac on iolen c ime in he Uni ed S a es, and Na zige and Au inen (2002)
summa ized ﬁndings, including hei own s udies, and ound ha inequali y exace ba es
he ulne abili y o popula ions o humani a ian eme gencies (wa ). Howe e , he s udy
add essed a selec ion o de eloping coun ies and hus did no include coun ies such as
he UK.
5.4.2. Inequali y Aba emen Measu es
Inequali y aba emen measu es a e ou side he scope o he p esen s udy. Howe e ,
du ing he COVID-19 pandemic in 2020, many coun ies implemen ed go e nmen suppo
measu es ha alle ia ed he economic e ec s o he pandemic, (e.g., in Sweden, Angelo
and Waldens öm (2023)), and his may explain why he ocus on inequali y was less du ing
he ac ual pandemic and s onge du ing he ollowing inﬂa ion pe iod. An in e es ing
concep o a “na u al a e o inequali y” has been pu o wa d by Lambe e al. (2003). The
na u al a e may e e o inequali y sen imen s o a popula ion o o an op imal ou pu a e.
57
Economies 2024,12, 135
5.5. How Economic Policies May C ea e G ea e Inequali y
Among economic s a es ha solici s ong discussions o inequali y a e inﬂa ion and
unemploymen . Among he e ec s lis ed in he li e a u e ha would inc ease inequali y
a e (i) inc eased p oﬁ s o ﬁ ms, (ii) educed ade among coun ies and (iii) inc eased
inno a ions. A mic o-mechanism ha could cause inc easing inequali y is he di e ences
in consume baske s o low- and high-income people (US da a, Ja a el (2021, pp. 603,
605)) wi h households headed by single woman a he low end (OECD da a, Azzollini
e al. (2023)). Food is a la ge pa o he baske ( ood and ene gy p ices end o inc ease
mo e han he a e age in a consume baske ). Finally, Filippin and Nunzia a (2019, p. 119)
sugges ha pe cei ed inﬂa ion is highe han ac ual inﬂa ion, bu ha he e is a “keeping
up wi h he Jones” e ec along he whole income dis ibu ion.
To educe inﬂa ion, a key ool o he cen al banks is o inc ease hei sho - e m
in e es a es. Howe e , inc easing he in e es a e may be associa ed wi h a highe p oﬁ o
la ge ﬁ ms and, again, a ec low-income people mo e han high-income people h ough he
consume baske a gumen (Webe and Wasne 2023). Inc easing ade may ha e con as ing
e ec s on inequali y. Low p ices on aded goods, e.g., ools and machine y om China,
will in p inciple a o low-income people, bu he esul s do no seem o suppo his
conjec u e; see, o ins ance, Ja a el (2021, pp. 600, 6011, 6015). Howe e , Rajagu u e al.
(2023, p. 487) sugges ha economic globaliza ion agg a a es income inequali y (and led o
he B exi o e in 2016). Ba h e al. (2023, p. 11) examined he poli ical pa ies’ elec ion
pla o ms o 169 Eu opean coun ies and ound ha inc eased impo exposu e dec eased
he wel a e s a e suppo .
Inno a ions and high pa en equency may inc ease he demand o skilled (and
educa ed) wo ke s, whe eas he demand o unskilled wo ke s dec eases (Díaz e al. 2020);
(Ja a el 2021, p. 600). Since he unskilled wo ke s belong o he low-income g oup,
inequali y would inc ease.
5.6. The Me hod
Mos s udie s o inequali y add ess inequali y and i s e ec s by compa ing e ec s
o inequali y among se e al coun ies; hus, o dina y linea eg ession (OLR), mul iple
eg essions (MR) and panel da a echniques a e used. Fo example, Lambe e al. (2003)
examined inequali y ac oss 96 coun ies, and Malla and Pa h ana akul (2022) examined
inequali y ac oss 68 coun ies. Some s udies s eng hen causali y in e e ences by applying
he G ange causali y, (G ange 1969) o c oss-co ela ion echniques (Kes in e al. 1998) o
hei da a se s. Howe e , bo h echniques equi e long da a se s (
≈
30 samples) and hus
o en ﬁnd bi-di ec ional causali ies, e.g., he Ogbeide and Agu (2015) s udy on po e y
and inequali y in Nige ia and Ce in e al. (2021) on income inequali y and echnological
inno a ion. I we a e aged o e long ime se ies, we would also ha e ound bi-di ec ional
causali y o ou ime se ies; see Figu e 3.
5.7. Robus ness
Ou ocus was on he e ms inequali y and inequali y aba emen measu es, bu we
could ha e sea ched o addi ional e ms desc ibing he e ec s o inequali y as an issue in
he poli ical con e sa ion. Howe e , we ound no e ms ha be e desc ibed ou in en ion
wi h he s udy and ha ga e signiﬁcan Google T end se ies. We used he e ms “ ai ness”,
“GDP g ow h”, “c ime” and “wa ” o iden i y he conce ns associa ed wi h inequali y.
The e ms we e selec ed by compa ing hem o o he simila e ms in he Mic oso Wo d
hesau us. We o iginally wan ed o use he e m “mo ale”, bu ai ness ga e a mo e
comple e ime se ies.
The HRLL me hod we use has been applied o sine unc ions wi h equal cycle pe iods
bu shi ed in ime ela i e o each o he . I is hen easily seen ha i wo ks as in ended.
Howe e , in an applica ion o o ecas ing algo i hms in economics, i iden iﬁed he o ecas
se ies as leading he obse a ion abou 80% o he ime, and he economy was shown o be
58
Economies 2024,12, 135
anomalous when he o ecas ing se ies was no leading (Seip e al. 2019). Thus, we belie e
ha he HRLL me hod iden iﬁes eal (obse ed) LL ela ions co ec ly.
5.8. Fu he Wo k
The e ms we use a e explo a o y, and i may be possible o ﬁnd e ms ha be e
exp ess people’s sen imen s. Ou esul s o he UK could be gene alized o o he coun ies.
Fo example, we downloaded inequali y exp essions o he US and ound ha se e al
e ms ha did no deli e Google ime se ies o he UK ga e adequa e ime se ies o he
US. Fu he s udies should add ess aba emen measu es o unwan ed consequences o
inequali y. A hi d issue is i i is possible o eplace he model s udy by Lambe e al.
(2003) on a “na u al a e o inequali y” by an empi ical in es iga ion based on UK da a.
Finally, we ha e discussed inequali y on in e annual and decadal scales, bu inequali y
inc eases in many coun ies o e mul idecadal scales, and his could be he objec i e o
u he s udies.
6. Conclusions
Inequali y among people is a challenging issue in many coun ies and is hypo hesized
o cause poli ical conﬂic s a ound hemes including ai ness, economic g ow h, c ime, and
wa . In con as o mos o he s udies on inequali y, we s udy he iming and s eng h o
in e es in a single coun y, he Uni ed Kingdom. We show, using Google T ends 2004 o
2022, ha he e m “inequali y” p ecedes he e m “inequali y measu es” a ound UK and
EU pa liamen elec ions and du ing pe iods wi h un a o able economic condi ions (e.g.,
high inﬂa ion). Ou esul s sugges ha aba ing unwan ed e ec s o inequali y would be
e ec i e a ound pa liamen elec ion imes and when inﬂa ion and unemploymen is high.
Howe e , since inﬂa ion and unemploymen a e he esul s o economic policy choices, i
may be possible o implemen aba emen measu es be o e inequali y issues become se ious.
Au ho Con ibu ions:
Concep ualiza ion, K.L.S. and F.E.S.; me hodology, K.L.S.; so wa e, K.L.S.;
alida ion, K.L.S. and F.E.S.; o mal analysis, K.L.S.; in es iga ion, K.L.S. and F.E.S.; esou ces, K.L.S.
and F.E.S.; da a cu a ion, F.E.S.; w i ing—o iginal d a p epa a ion, K.L.S. w i ing— e iew and
edi ing, K.L.S. and F.E.S.; isualiza ion, K.L.S.; supe ision, F.E.S.; p ojec adminis a ion, K.L.S.
and F.E.S.; unding acquisi ion, K.L.S. and F.E.S. All au ho s ha e ead and ag eed o he published
e sion o he manusc ip .
Funding: This esea ch was unded by Oslo Me opoli an Uni e si y, g an numbe 1.
In o med Consen S a emen : No applicable.
Da a A ailabili y S a emen : All da a and all calcula ions a e a ailable om he ﬁ s au ho .
Conﬂic s o In e es : The au ho s decla e no conﬂic s o in e es .
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Disclaime /Publishe ’s No e:
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61
Ci a ion: Valen ini, Enzo. 2024.
Pa e ns o In e gene a ional
Educa ional (Im)Mobili y. Economies
12: 126. h ps://doi.o g/10.3390/
economies12060126
Academic Edi o : Gheo ghe
H. Popescu
Recei ed: 27 Ma ch 2024
Re ised: 13 May 2024
Accep ed: 17 May 2024
Published: 21 May 2024
Copy igh : © 2024 by he au ho .
Licensee MDPI, Basel, Swi ze land.
This a icle is an open access a icle
dis ibu ed unde he e ms and
condi ions o he C ea i e Commons
A ibu ion (CC BY) license (h ps://
c ea i ecommons.o g/licenses/by/
4.0/).
economies
A icle
Pa e ns o In e gene a ional Educa ional (Im)Mobili y
Enzo Valen ini
Depa men o Poli ical Science, Communica ion and In e na ional Rela ions, Uni e si y o Mace a a,
62100 Mace a a, I aly; [email p o ec ed]
Abs ac :
In e gene a ional educa ion mobili y is a key dimension o social mobili y and explo es
he ex en o which educa ional a ainmen is ansmi ed ac oss gene a ions wi hin a socie y. The
implica ions o low educa ion mobili y conce n bo h equi y (e e yone should ha e he same op-
po uni ies) and e ﬁciency (i would be good o he economy and socie y i he mos gi ed and
dese ing young people we e o s udy and no he child en o he al eady educa ed). The li e a u e
iden iﬁes se e al d i e s ha can inﬂuence he le el o social mobili y in gene al and educa ion
mobili y speciﬁcally, including cha ac e is ics o educa ional sys ems, public spending, deg ee o
u banisa ion, in o mal ic ions, and belie s. This pape seeks o iden i y ‘pa e ns o in e gene a ional
educa ion (im)mobili y’ h ough a clus e analysis ha akes in o accoun he le el o in e gene a-
ional mobili y in educa ion and a numbe o a iables conce ning i s possible d i e s, conside ing
da a on 82 coun ies (wi h di e en le els o de elopmen ). The ad an age o clus e analysis lies in
he possibili y o iden i ying egula i ies, bu a oiding easoning ‘on a e age’, i.e., sa egua ding he
possibili y ha di e en social pa e ns may exis . The esul s also allow us o specula e on possible
policies o inc ease school mobili y, highligh ing, among o he hings, he ‘equalising’ ole played by
public spending on educa ion.
Keywo ds:
in e gene a ional educa ion mobili y; social mobili y; clus e analysis; public spending
in educa ion
1. In oduc ion
The s udy o he in e gene a ional ansmission o socio-economic s a uses is in e es -
ing and opical in se e al espec s.
On he one hand, i helps us del e in o he well-known heme o ‘equali y o wha ?’
(Sen 1980). In ac , i is qui e e iden ha a s ong co ela ion o socio-economic s a uses
be ween pa en s and child en is a sign o some lack o equali y o oppo uni y. F om his
poin o iew, inequali y o ou comes (e.g., income) can be mo e o less socially accep able i
i is accompanied, o no , by equali y o oppo uni y. None heless, high income inequali y
can i sel be an obs acle o a eal equali y o oppo uni y (Co ak 2013).
On he o he hand, mobili y ac oss gene a ions is no only an issue o equali y, bu
also o e ﬁciency, especially when deﬁned in e ms o educa ional mobili y (D’Addio 2007).
I is impo an ha i is he mos able and willing people who s udy (and gain access o
he esul ing social oles) and no (only) people om ich amilies. O he wise, we would
end up wi h people wi h inadequa e abili ies in key oles (indeed, as o en seems o be
he case), and we would lose he oppo uni y o socially ake ad an age o he abili ies o
gi ed people jus because hey come om ‘disad an aged’ amilies o social backg ounds
(Glomm and Ra ikuma 1992; Lloyd-Ellis 2000; S a olani and Valen ini 2007).
The ocus o he esea ch p oposed in his pape is p ecisely on educa ional mobili y,
which among o he hings is conside ed o be a key elemen o o e all economic mobili y
ac oss gene a ions (Feins ein e al. 2006; D’Addio 2007; Je im and Macmillan 2015; Na ayan
e al. 2018; S uhle 2018).
The li e a u e iden iﬁes se e al ac o s ha may inﬂuence he le el o educa ional
in e gene a ional mobili y (and, h ough i , in e gene a ional income mobili y).
Economies 2024,12, 126. h ps://doi.o g/10.3390/economies12060126 h ps://www.mdpi.com/jou nal/economies
62
Economies 2024,12, 126
Public spending in educa ion is a key elemen . I can no only imp o e he quali y
o educa ion in gene al, bu also beneﬁ hose who would be a isk o s a ing o disad-
an aged. F om a heo e ical poin o iew, Solon (2004) p oposes a model acco ding o
which in e gene a ional income elas ici y inc eases as he e u n on in es men in human
capi al inc eases, bu which dec eases wi h he p og essi i y o public in es men in human
capi al. The model o Da ies e al. (2005) analyses in e gene a ional ea ning mobili y in a
amewo k whe e human capi al plays a c ucial ole and concludes ha mobili y is highe
wi h public han wi h p i a e educa ion. He ing on (2015) de eloped an o e lapping
gene a ions model and calib a ed i in o de o compa e he US and No way empi ically
and quan i a i ely, eaching he conclusion ha public educa ion spending plays a key
ole in in e gene a ional ea ning pe sis ence. Lee and Seshad i (2019) p esen a model
o human capi al in es men s ha explains he in e gene a ional pe sis ence o ea nings,
weal h, and college a ainmen and conclude ha educa ion subsidies can educe he in e -
gene a ional pe sis ence o economic s a us. Maye and Lopoo (2008) ocused on human
capi al in es men . They used da a om he Panel S udy o Income Dynamics and he US
Census o Go e nmen s and ound g ea e in e gene a ional mobili y in high-spending
s a es compa ed wi h low-spending s a es. Neidhö e e al. (2018) compu ed se e al in-
dexes o in e gene a ional educa ion mobili y o 18 La in Ame ican coun ies, ﬁnding
signiﬁcan c oss-coun y di e ences also associa ed wi h public educa ional expendi u es.
Balcaza e al. (2015) used da a on 48 coun ies ha pa icipa ed in he P og amme o
In e na ional S uden Assessmen (PISA) in 2012, ﬁnding e idence o a co ela ion be ween
public spending on schooling and inequali y o oppo uni y in achie ing basic p oﬁciency
in eading, ma hema ics, and science. In Na ayan e al. (2018), eg essions in ol ing
da a on iche economies showed ha highe public spending on educa ion is associa ed
wi h highe ela i e in e gene a ional mobili y in educa ion, and he au ho s concluded
ha ‘[ ]his is consis en wi h he heo y ha public spending helps equalise oppo uni ies
h ough in es men s ha compensa e o he gap in p i a e in es men s be ween child en
o ich and poo pa en s’ (Na ayan e al. 2018, p. 19).
Mo eo e , i public spending on educa ion is speciﬁcally di ec ed owa ds indi iduals
om disad an aged economic backg ounds and is ﬁnanced h ough axes ha pa icula ly
all on indi iduals om weal hy amilies (e.g., beques s axa ion), i can be pa icula ly
e ec i e in ebalancing oppo uni ies o access o educa ion i sel , os e ing equi y and
e ﬁciency gains (S a olani and Valen ini 2007).
Public in e en ion in his ﬁeld can also conce n egula ion, and he p esence and
du a ion (in yea s) o compulso y educa ion can ce ainly inﬂuence educa ional mobili y,
pa icula ly in he mos disad an aged con ex s. An uneduca ed (and he e o e mo e likely
o be ‘poo ’) pa en migh decide no o make hei child s udy (o hey may s udy less
han hey should). I a ce ain numbe o yea s o educa ion is compulso y, his choice is
limi ed. I is impo an o emphasise ha he yea s o compulso y educa ion in gene al a e
somewha ela ed o he le el o public spending on educa ion; howe e , hey ep esen a
sligh ly di e en aspec o public in e en ion di ec ly ela ed o egula ion a he han he
le el o spending.
Socio-economic seg ega ion is ano he ac o ha can s ongly inﬂuence educa ional
mobili y. Van de Weide e al. (2021), using da a on 153 coun ies, ound ha p oxies
o seg ega ion a e nega i ely co ela ed wi h in e gene a ional educa ion mobili y. A
speciﬁc deﬁni ion o his concep conce ns spa ial/ esiden ial seg ega ion. Recen esea ch
sugges s ha mo e esiden ially seg ega ed a eas (i.e., whe e amilies wi h di e en socio-
economic backg ounds and aces li e in sepa a e neighbou hoods) end o ha e lowe
in e gene a ional mobili y. Che y e al. (2014) used adminis a i e eco ds o mo e han
40 million child en in he US and, wi h OLS (O dina y Leas Squa es) eg essions ac oss
700 a eas, ound ha high-mobili y a eas ha e less esiden ial seg ega ion. Connolly e al.
(2019) linked mic oda a om he US and Canada, and hei OLS es ima es sugges ha
‘inequali ies be ween whi es and blacks likely play an impo an ole in unde s anding
why he Uni ed S a es has lowe a es o in e gene a ional mobili y’ (Connolly e al. 2019,
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Economies 2024,12, 126
is low in bo h clus e s E and F) and he amily o o igin does no ma e much when he
pa en s a e all equally poo . When he le el o educa ion and income begins o inc ease,
he gap in oppo uni ies be ween he child en o poo and weal hy amilies may begin o
widen; howe e , in weal hy economies, i may na ow when he s a e in es s in public
educa ion. All hese mechanisms seem o be conﬁ med by he esul s o he analysis in his
a icle.
On he o he hand, i is in e es ing o no e ha g ea e in e gene a ional mobili y
seems o be a ou ed in poo coun ies by a highe deg ee o u banisa ion and longe
pe iods o compulso y educa ion (which, on he con a y, does no seem impo an in
ich coun ies). These esul s a e in line wi h he conside a ions s a ed in he in oduc ion
(which illus a es he possible mechanisms in place). Equally, he impo ance gi en o
child en’s independence is mo e impo an o imp o ing in e gene a ional mobili y in
ad anced economies, in which households ha e addi ional esou ces hey may de o e
o p i a e in es men in educa ion. The same line o easoning can be applied o he ac
ha g ea e income inequali y is associa ed wi h lowe in e gene a ional mobili y in ich
coun ies (in which household income can ha e a g ea e inﬂuence on child en’s ou comes
h ough p i a e in es men ), which is no he case in poo coun ies.
5. Conclusions
In d awing conclusions, i is impo an o emphasise ha he analysis pe o med in
his s udy allows us o de i e an associa ion be ween he mean alues o he a iables in
he di e en clus e s bu does no allow us o make any s a emen s ega ding causali y.
In he case o income inequali y, he dilemma is ob ious: Does lowe in e gene a ional
mobili y a ou he pe sis ence o income inequali y? O does high income inequali y
unde mine he equali y o oppo uni y? The opic is widely deba ed, bu on balance i
does no seem a - e ched o assume ha he isk o a icious ci cle is p esen in medium-
and high-GDP coun ies. This icious ci cle can, howe e , be b oken by public in es men
in educa ion as he esul s o his analysis show. In his case, he causali y, al hough no
o mally demons a ed, seems clea : i is easie o imagine ha a highe le el o public
spending encou ages g ea e in e gene a ional mobili y a he han he o he way a ound.
The di ec ion o he ela ionship be ween in e gene a ional mobili y and he impo -
ance gi en o child en’s independence is also ambiguous. Does os e ing child en’s inde-
pendence p omo e mobili y (because ich amilies do no indulge hei child en oo much)?
O do I wan my child o be independen because I know he o she has he oppo uni y?
While bea ing in mind he ac ha he lack o iden iﬁca ion o causal links is a s ong
limi a ion, based on he (almos desc ip i e) e idence ob ained i is possible o ex ac some
indica ions in e ms o policies ha could help o imp o e in e gene a ional mobili y. When
di e en ia ing be ween less- and mo e-de eloped coun ies (a dis inc ion ha is one o he
key elemen s o his s udy), he ollowing conclusions can be d awn:
-
Fo less-de eloped coun ies, public policies should limi he e ec s o physical, social,
and economic seg ega ion and inc ease he numbe o yea s o compulso y educa ion.
Public spending on educa ion (as a pe cen age o GDP) does no seem o be di ec ly
ele an (in line wi h some conside a ions s a ed in he li e a u e and poin ed ou in
he in oduc ion). Howe e , i becomes ele an again h ough he abo e wo channels
(less seg ega ion and mo e compulso y educa ion) because bo h would s ill equi e
public in e en ion a hei own cos ;
-
Fo mo e-de eloped coun ies, inc easing he gene al le el o educa ion and inc easing
he gene al le el o public spending on educa ion a e key elemen s and, o cou se,
can go hand in hand. Income edis ibu ion policies can also be impo an ( hey ac
h ough he channel o edis ibu ing income- ela ed oppo uni ies).
The impo ance gi en o child en’s independence is a cul u al ai ha seems o
play a ole in de eloped coun ies; howe e , i does no seem o be an a ea whe e di ec
public in e en ion is possible o app op ia e. Indi ec ly, policies ha inc ease equali y o
oppo uni y could be help ul so ha , o e ime, pa en s eel able o ely on hei child en’s
70

Economies 2024,12, 126
independence. I is clea , howe e , ha his discou se opens up conside a ions o i uous
o icious ci cles as poin ed ou abo e.
The g ea es u ili y o his analysis lies in he iden iﬁca ion o ‘pa e ns’ by g ouping
coun ies acco ding o he le el o in e gene a ional educa ion mobili y (o ‘immobili y’)
and o he a iables ha may be associa ed wi h i . This can help us unde s and he
phenomenon o in e gene a ional mobili y in educa ion. The esul s a e in line wi h
hose highligh ed in he li e a u e and hus suppo and s eng hen hem, including by
highligh ing he non-mono onici y o mechanisms and ela ionships among coun ies wi h
di e en le els o de elopmen . This analysis also emphasises he ‘equalising’ ole played
by public spending on educa ion in middle- and high-income coun ies. Finally, an elemen
new o he empi ical li e a u e was in oduced in o his analysis: he explici conside a ion
o he ole played by cul u al a i udes wi h espec o child en’s independence.
In e ms o di ec ions o u u e esea ch, wo aspec s can be highligh ed. The ﬁ s
is he need o deepen he causal ela ionships be ween in e gene a ional mobili y and
he ac o s ha may inﬂuence i while di e en ia ing be ween mo e- and less-de eloped
coun ies. The second is he need o ake cul u al aspec s in o accoun , bo h heo e ically
and empi ically.
Funding: This esea ch ecei ed no ex e nal unding.
Ins i u ional Re iew Boa d S a emen : No applicable.
In o med Consen S a emen : No applicable.
Da a A ailabili y S a emen :
The da a used in he a icle we e all aken om ee, publicly accessible
da abases. In addi ion, he da a will be made a ailable by he au ho on eques .
Conﬂic s o In e es : The au ho decla es no conﬂic s o in e es .
Appendix A
Table A1.
Coun ies included in he analysis, so ed acco ding o he alue o MOB_EDU (‘Expec ed
ank o a child whose pa en s ank in he bo om hal o he educa ion dis ibu ion’).
Coun y MOB_EDU Coun y MOB_EDU Coun y MOB_EDU
Cyp us 49.8 Po ugal 40.4 I an 37.2
Denma k 47.1 Hunga y 40.3 Malaysia 37.1
Maldi es 46.7 Se bia 40.2 Aus ia 37.1
Philippines 46.1 Swi ze land 40.0 Aze baijan 37.0
Is ael 45.6 Uk aine 39.9 U uguay 37.0
Russian Fed. 45.5 Ky gyz Rep. 39.8 G eece 36.9
Zambia 45.1 Egyp 39.8 I aq 36.8
Iceland 44.9 Ko ea, Rep. 39.6 Gua emala 36.7
Slo enia 44.4 Sweden 39.6 El Sal ado 36.6
Ge many 43.8 Sou h A ica 39.1 Kenya 36.6
Slo ak Rep. 43.1 Thailand 39.0 China 36.5
Finland 42.8 Bela us 38.9 B azil 36.3
Belgium 42.8 I aly 38.8 Mexico 36.0
Dominican
Rep. 42.5 Poland 38.4 Bangladesh 35.8
Tu key 42.3 Vie nam 38.4 Chile 35.7
Uzbekis an 41.9 Bulga ia 38.4 I eland 35.6
71
Economies 2024,12, 126
Table A1. Con .
Coun y MOB_EDU Coun y MOB_EDU Coun y MOB_EDU
Uni ed
Kingdom 41.9 A menia 38.3 Pe u 35.6
Albania 41.9 Moldo a 38.3 Uni ed S a es 35.5
F ance 41.8 Aus alia 38.2 Romania 35.3
Es onia 41.7 C oa ia 38.2 Pakis an 35.0
Japan 41.7 A gen ina 38.0 Ecuado 34.9
The
Ne he lands 41.3 Spain 37.8 Nige ia 34.4
La ia 41.3 Geo gia 37.5 Colombia 34.3
No way 41.0 Czech Rep. 37.4 Boli ia 34.2
Indonesia 41.0 Kazakhs an 37.4 Lebanon 33.5
Jo dan 40.9 Mongolia 37.3 Ghana 32.7
Canada 40.8 Tunisia 37.3
Li huania 40.8 India 37.3
Appendix B
Addi ional echnical in o ma ion on he a iables ele an o he ep oducibili y o he
analysis.
Codes o he indica o s in he Wo ld Bank Wo ld De elopmen Indica o (WDI)
da abase (h ps://da aca alog.wo ldbank.o g/sea ch/da ase /0037712, accessed on 20
July 2023):
- GDP pe capi a (Cons an 2017 In . Dolla s): NY.GDP.PCAPP.PP.KD
-
Educa ional a ainmen (% o he popula ion 25+ who a leas comple ed uppe sec-
onda y school): SE.SEC.CUAT.UP.ZS
- U ban popula ion (% o o . popula ion): SP.URB.TOTL.IN.ZS
- Gini Index: SI.POV.GINI
- Go e nmen expendi u e on educa ion (% GDP): SE.XPD.TOTL.GD.ZS
- Compulso y educa ion (yea s): SE.COM.DURS
The a iable ‘Sha e o pa en s indica ing ‘Child en’s Independence’ as an impo an
quali y in child en (%)’ comes om he Eu opean Values S udy—Wo ld Values S udy In eg a ed
su ey 1981–2021 (h ps://www.wo ld aluessu ey.o g/WVSEVS end.jsp, accessed on 27
July 2023).
The In eg a ed Values Su ey (IVS) da ase 1981–2021 can be cons uc ed by me ging
he EVS T end File 1981–2017 (doi:10.4232/1.13736) and he WVS ime se ies 1981–2021
da ase (doi:10.14281/18241.15). I is based on he Common EVS/WVS Dic iona y (2021).
I is also possible o ﬁnd he IVS me ge syn ax o S a a a ollowing link: h ps:
//www.wo ld aluessu ey.o g/WVSEVS end.jsp, accessed on 20 July 2023.
The code o he a iable used o de i e he pe cen age o pa en s who alue hei
child en’s independence is A029 ‘Impo an child quali ies: independence’ (see he IVS
Common EVS–WVS dic iona y a h ps://www.wo ld aluessu ey.o g/WVSEVS end.jsp
o u he de ails). The indi idual weigh used in o de o ob ain he coun y a e age ( o
each a ailable yea ) is he a iable whose code is S017.
The a iable ega ding in e gene a ional mobili y in educa ion (‘Expec ed ank o a
child whose pa en s ank in he bo om hal o he educa ion dis ibu ion’) comes om he
Wo ld Bank Global Da abase on In e gene a ional Mobili y (GDIM): h ps://da aca alog.
wo ldbank.o g/sea ch/da ase /0050771/Global-Da abase-on-In e gene a ional-Mobili y,
accessed on 17 July 2023.
In ha da abase, he a iable name/code is ‘MU050_ andom ieb eak’.
72
Economies 2024,12, 126
Appendix C
Coun ies alling wi hin he clus e s iden iﬁed in Table 2.
Clus e A (High GDP, lowe in e gene a ional mobili y): Aus alia, Belgium, Canada,
F ance, Ge many, Hunga y, I eland, I aly, La ia, The Ne he lands, Spain, Swi ze land,
Uni ed Kingdom, Uni ed S a es.
Clus e B (High GDP, highe in e gene a ional mobili y): Aus ia, Cyp us, Denma k,
Finland, Iceland, Is ael, Japan, Li huania, No way, Slo enia, Sweden.
Clus e C (Middle GDP, highe in e gene a ional mobili y): A menia, Aze baijan,
Bela us, Bulga ia, C oa ia, Czech Republic, Es onia, Geo gia, G eece, Jo dan, Kazakhs an,
Ko ea, Rep., Ky gyz Republic, Moldo a, Mongolia, Poland, Romania, Russian Fede a ion,
Se bia, Slo ak Republic, Uk aine, Uzbekis an.
Clus e D (Middle GDP, lowe in e gene a ional mobili y): A gen ina, Boli ia, B azil,
Chile, Colombia, Ecuado , El Sal ado , Gua emala, Mexico, Pe u, Sou h A ica, U uguay.
Clus e E (Low GDP, highe in e gene a ional mobili y): Dominican Republic, Mal-
di es, Philippines, Tu key, Zambia.
Clus e F (Low GDP, lowe in e gene a ional mobili y): Albania, Bangladesh, China,
Egyp , A ab Rep., Ghana, India, Indonesia, I an, I aq, Kenya, Lebanon, Malaysia, Nige ia,
Pakis an, Po ugal, Thailand, Tunisia, Vie nam.
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Disclaime /Publishe ’s No e:
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74
Ci a ion: C oci Angelini, Elisabe a,
F ancesco Fa ina, and Sil ia So ana.
2024. The Impac o he G ea
Recession on Well-Being ac oss
Eu ope Ten Yea s On: A Clus e
Analysis. Economies 12: 115.
h ps://doi.o g/10.3390/
economies12050115
Academic Edi o : B uce Mo ley
Recei ed: 1 Ap il 2024
Re ised: 30 Ap il 2024
Accep ed: 7 May 2024
Published: 10 May 2024
Copy igh : © 2024 by he au ho s.
Licensee MDPI, Basel, Swi ze land.
This a icle is an open access a icle
dis ibu ed unde he e ms and
condi ions o he C ea i e Commons
A ibu ion (CC BY) license (h ps://
c ea i ecommons.o g/licenses/by/
4.0/).
economies
A icle
The Impac o he G ea Recession on Well-Being ac oss Eu ope
Ten Yea s On: A Clus e Analysis
Elisabe a C oci Angelini 1,*, F ancesco Fa ina 2and Sil ia So ana 3
1Cen e o In e disciplina y S udies in Economics, Psychology and Social Sciences (CISEPS), Uni e si y o
Milano-Bicocca, 20126 Milan, I aly
2
Cen e o In es iga ion and Modelling o Expe imen al Obse a ions (CIMEO), Sapienza Uni e si y o Rome,
00161 Rome, I aly
3COOSS Ma che Onlus, 60121 Ancona, I aly
*Co espondence: elisabe ac [email p o ec ed]
Abs ac :
To e alua e a ia ions in he well-being dimensions o Eu opean ci izens, we ely upon
P incipal Componen Analysis me hodology, whe eby a la ge se o in e ela ed indica o s a e
educed o a small numbe o agg ega e syn he ic a iables. We ﬁnd ha he 2008 c isis impinged
di e en ly on he a ious dimensions o well-being. The e olu ion o he indica o s has a ec ed
di e en clus e s o coun ies in a ious ways. Mos impo an ly, we obse e ha he e has been a
shi o he p incipal componen om he poo in e ms o ma e ial dep i a ion o he isk o po e y
o he wo sening condi ions in he labo ma ke .
Keywo ds: Eu opean Union; G ea Recession; well-being; P incipal Componen Analysis
1. In oduc ion
The G ea Recession had widesp ead consequences. Du ing he 2008 ﬁnancial c isis
he in e play be ween he mu ual exposu e o banks and go e nmen s o he o he pa y’s
insol ency isk g ea ly dis essed he balance shee s o he banks, ﬁnally leading o a
c edi c unch. A se e e ecession in ad anced coun ies, wi h ising unemploymen and
nega i e g ow h a es, caused a lowe demand le el. In Eu ope, diminishing ea nings
o households and declining p oﬁ s o ﬁ ms coupled wi h he slackened unc ioning o
au oma ic s abilize s posi ed he Eu ozone GDP dynamics on a lowe pa h (De G auwe
and Ji 2013). To coun e ising public deﬁci and public deb s wi h espec o GDP, aus e i y
policies we e implemen ed h ough es ic i e impulses o ﬁscal policy.
The less e ﬁcien coun ies pa icipa ing in he Eu opean Mone a y Union ha e been
exposed o he di e gen impac o he common mone a y policy and o he common ﬁscal
ules. Due o he aus e i y policies mean o eco e compe i i eness, eal de alua ion
ensued, wi h bo h lowe employmen a es and subs an ial wage cu s. Rocke ing isk
p emia inc eased he sp ead o he Eu ozone’s so e eign bonds is-à- is he Ge man
10-yea
bund, wi h pa icula ly high hikes in pe iphe al coun ies due o a con agion e ec igge ed
by he pa ial de aul o he G eek public deb (C oci Angelini e al. 2016).
The bu den o he labo ma ke adjus men has disp opo ionally allen on he low-
skilled labo o ce h ough lowe job p o ec ion and lowe pay, and o a la ge ex en on
non-s anda d jobs. The widening op–bo om income inequali y has been due mo e o
inc easing unemploymen han o an enla ging dis ance be ween he bo om sec ion o
he wage dis ibu ion and he a e age wage, al hough in a ew coun ies he educ ion in
ea nings—la ge o high-income han o low-income households—has sligh ly educed
income inequali y (ILO 2015). Cu s in social expenses educed he public p o ision o
bo h mone a y ans e s and in-kind se ices. No only we e pensions and unemploymen
beneﬁ s educed, bu he deg ee o co e age, a ge ing, and gene osi y sh ank oo. These
de elopmen s impinged no only on he ea nings dimension, bu also on quali y o li e, as
Economies 2024,12, 115. h ps://doi.o g/10.3390/economies12050115 h ps://www.mdpi.com/jou nal/economies
75

Economies 2024,12, 115
shown by ele an a ia ions in he main non-mone a y well-being dimensions in di e en
coun ies. Endu ing consequences o li ing condi ions we e egis e ed in c ucial dimen-
sions o well-being, such as heal h, educa ion, and also social inclusion (Jenkins e al. 2013).
In 1985, he Council o Minis e s o he Eu opean Union deﬁned he “poo ” as: “ he pe sons
whose esou ces (ma e ial, cul u al and social) a e so limi ed as o exclude hem om he
minimum accep able way o li e in he Membe S a e o which hey belong” (EU Council o
Minis e s 1985). As an e ec o he lowe ing disposable income caused by coun e cyclical
ﬁscal impulses and mo e ﬂexible labo ma ke s, he ulne abili y o low-skilled wo ke s
and he p eca ious condi ions o he labo o ce wi h pa - ime jobs expanded.
Empi ical e idence shows ha in wo- hi ds o OECD coun ies, income inequali y
has been g owing hand in hand wi h ela i e po e y; in all o hem he isk o po e y,
and in some o hem also he in ensi y o po e y, has been soa ing (A kinson e al. 2010).
The pe cen age o ma e ially dep i ed people anged om 3% in Luxembou g and 6% in
Sweden and he Ne he lands up o 45% in La ia. These dis ances we e much wide han
he dispe sion o po e y isk, anging om 10% o 21% (Fusco e al. 2010,
pp. 137–38
).
Howe e , he he e ogenei y in li ing condi ions ac oss Eu opean coun ies ex ends beyond
he income-based indica o s o po e y and inequali y. An Index o Economic Well-being,
cons uc ed by inco po a ing in o ma ion on consump ion, weal h, inequali y, and eco-
nomic insecu i y o he OECD coun ies, shows ha he economic c isis mo e nega i ely
a ec ed well-being in he Pe iphe al Eu ozone, is-à- is he o he coun ies in he sample.
Low-income people and he poo we e also disp opo iona ely a ec ed by he in ensi-
ﬁca ion in non-ma e ial dep i a ion. The isk o po e y soa ed mainly in he sub-g oup o
in olun a ily pa - ime wo ke s (Ho emans e al. 2015). While he mos d ama ic all in
income was seen in he poo in G eece, empi ical e idence shows ha in many coun ies
low-income g oups and he poo we e mo e se e ely hi du ing he G ea Recession in
e ms o socio-economic a ibu es (Whelan and Maî e 2012). Be ween 2008 and 2012 he
all in equi alized household income was e y la ge in Iceland (40%), G eece (30%), and
I eland (20%), and o a lesse ex en in he Uni ed Kingdom, Spain, and Po ugal, whe e
educ ions anged om 13% o 10%. To con ey he well-being dis ance ac oss people
conce ning ma e ial esou ces, he a - isk-o -po e y indica o has been employed. In
2008, 19 million people we e li ing in se e ely ma e ially dep i ed households in Eu ope;
17 million
indi iduals aged 0–59 we e li ing in jobless households; 49.6 million we e li ing
in households a isk o po e y, bu we e nei he jobless no se e ely ma e ially dep i ed;
40 million we e li ing in jobless households and/o ma e ially dep i ed e en i no a
isk o po e y; whe eas 6.9 million we e li ing in jobless households, a isk o po e y,
and se e ely ma e ially dep i ed. “The a e o he 12 ‘new’ Membe S a es (NMS12)
was 17.3 pe cen , a li le bu no much highe han o EU-15 wi h a a e o 16.4 pe cen .
I is ce ainly no he case ha hose a isk o po e y on he EU deﬁni ion a e mos ly
o be ound in he New Membe S a es: o he 80+ million a isk o po e y in EU-27,
64 million
a e o be ound in he EU15. In Ge many, alone, he e a e 12
1
2
million; in he
Uni ed Kingdom 11
1
2
million; in I aly 11 million; and F ance and Spain oge he accoun
o a u he 17 million. In he la ges New Membe S a e, Poland, he numbe o people a
isk o po e y is abou 111
2million” (A kinson and Ma lie 2010, p. 106).
The Eu ope 2020 Agenda, adop ed by he Eu opean Union (Eu opean Commission
2010), poin ed a making subs an i e p og ess, among o he goals, in he p omo ion o
social inclusion. The objec i es se in Lisbon in 2000 we e nei he en i ely accomplished by
all membe s a es, no by he EU as a whole (G imaccia 2021). Also due o he COVID-19
pandemic, he “s a egy o a sma , inclusi e and sus ainable g ow h” did no deli e i s
p omises. The 2020 a ge in he a ea o po e y and social exclusion was deﬁned on he
basis o h ee indica o s: (1) he numbe o people conside ed ‘a - isk-o -po e y’ acco ding
o he EU deﬁni ion, whe e he po e y isk h eshold se a 60% o he na ional household
equi alized median income; (2) he numbe o ma e ially dep i ed people; and (3) he
numbe o people aged 0–59 li ing in ‘jobless’ households, whe e no membe aged 18–59 is
wo king, o whe e membe s aged 18–59 ha e, on a e age, e y limi ed wo k a achmen .
76
Economies 2024,12, 115
The a ge was se o educe by 25% he numbe o Eu opeans li ing below na ional po e y
lines, by li ing a ound 20 million people ou o po e y. The p oblem o ulﬁlling he
objec i es o social inclusion se in he Eu ope 2020 Agenda was conside ably exace ba ed
(A kinson and Ma lie 2010).
The G ea Recession hi Eu opean coun ies di e en ly by inc easing he isk o po e y
and inequali y and, wi hin hose coun ies, hi indi idual households in e ms o ma e ial
and non-ma e ial dep i a ions, which include heal h and educa ion as well as o he dimen-
sions ele an o he quali y o li e—a concep whose con en is s ill deba ed, bu on whose
mul idimensionali y he e is no doub .
Ou pape in es iga es how he eal de alua ion ensuing he G ea Recession a ec ed
he mul idimensional well-being in Eu opean coun ies h ough P incipal Componen
Analysis (PCA). The main idea is o summa ize in a ew majo poin s he di e ences,
i any, encoun e ed by households a e he c isis, how hei well-being was a ec ed a
ha ime, and whe he o no hey ound i di ﬁcul o eco e . While he e is no lack o
s udies add essing single issues a he coun y le el, especially om a mac oeconomic
poin o iew, no many a e based on mic oda a and explo e household beha io in a
mul idimensional amewo k by applying PCA.
The pape is o ganized as ollows: Sec ion 2 e iews some empi ical li e a u e mean
o ame he se ing and whe e he ele ance o mul idimensional well-being has been
add essed; Sec ion 3 discusses he me hodological choice o analyzing he impac o he
G ea Recession on Eu opean well-being h ough PCA, also compa ed wi h o he me hods.
The esul s a e p esen ed in Sec ion 4 and discussed in Sec ion 5 whe e a compa ison o
ou esul s wi h p e ious esea ch is p o ided. The 2008 c isis impinged di e en ly on
he a ious dimensions o well-being. All in all, ou ﬁndings e y much di e en ia e
depending on he indica o s and on he di e en g oups o coun ies. Sec ion 6 concludes
he pape .
2. Li e a u e Re iew
The conce n abou income dis ibu ion and social exclusion in p i a e households in
he EU compellingly eme ged a he u n o he cen u y. The Eu opean Union S a is ics
on Income and Li ing Condi ions (EU-SILC) da ase was es ablished in he amewo k o
he Open Me hod o Coo dina ion wi hin he P og amme o Communi y Ac ion mean o
encou age coope a ion be ween Membe S a es o coun e ac social exclusion. I co e s
Eu opean coun ies, no necessa ily membe s o he EU, and aims a issuing compa able
s a is ics h ough an in eg a ed design in his a ea o inqui y. A e y wide li e a u e
appea ed ocusing on concep s, measu emen , and e alua ions o di e en aspec s o
inequali y. By hei e y na u e, socio-economic phenomena a e he join p oduc o a
a ie y o mic o-economic cha ac e is ics (e.g., indi idual ma e ial dep i a ion) and/o
mac oeconomic condi ions (e.g., an unde employmen equilib ium wi h jobless households
and/o indi iduals a high isk o po e y) impinging on he well-being o socie y a la ge
while in e ela ions ac oss he mos ele an a iables a e di ﬁcul o disen angle.
Following he “capabili y app oach” (Sen 1985), in ecen decades he esea ch on
well-being has u ned owa ds mul idimensionali y. Indeed, quali y o li e is a mul i ace ed
concep (Nussbaum and Sen 1993) o be achie ed h ough a se ies o unc ionings, consis -
ing o oppo uni ies in e ms o pe sonal capaci ies. The empi ical s and o li e a u e on
social indica o s has inc eased eno mously in he las h ee decades, sugges ing ha , o
ob ain a comp ehensi e e alua ion o well-being, mo e dimensions need be added o he
s anda d mone a y dimension (Nolan and Whelan 2014).
Di e gen pe capi a GDP ac oss he EU membe s a es, and he dispe sion o
socio-economic s a us wi hin he popula ion, a e bound o impinge on heal h condi-
ions (
C immins e al. 2009
). Acco ding o EU-SILC da a (which e e o sel -pe cei ed
heal h s a us, longs anding illness o disabili y, unme medical and den al ea men s, and
limi a ions on daily ac i i y), heal h limi a ions impai ed ac i i y le els be ween up o
77
Economies 2024,12, 115
a ound one-ﬁ h in Cyp us, Poland, Sweden, and he Uni ed Kingdom, and o e one- hi d
in Es onia, Finland, and La ia (He nández-Que edo e al. 2010).
An analysis conduc ed by he EUROMOD eam shows ha he key ac o in p o ec ing
a household om a d op in income is he p esence o mo e han one single membe o he
household ea ning an income (Figa i e al. 2010). Two indi iduals wi h he same income can
ha e e y di e en li ing s anda ds i he esou ces a ailable o each o hem di e because
o di e en na ional p o ision o public ans e s (Fusco e al. 2010). Wel a e ins i u ions
we e c ucial in he educ ion o he isk o po e y wi hin he Eu opean Union, anging
om unde 15% o o e 60%, wi h an a e age alue o 38% (Whelan e al. 2014).
While he e olu ion o jobs, especially o low-income households, is ce ainly ele an
in he c oss-coun y compa ison o well-being in Eu ope be o e and a e he c isis, he
e ec o he swi ch owa ds a mo e ﬂexible labo ma ke is di ﬁcul o assess. Du ing he
G ea Recession, unemploymen in he OECD labo o ce ose om 6.6% o 8%, wi h you h
unemploymen doubling on a e age, and eaching a peak o 50% in G eece and Spain
(OECD 2015). Recen es ima es con ey he message ha a possible posi i e impac on
he employmen a e e y much depends on he ini ial deg ee o igidi y and he mix o
ins i u ional e o ms (Sologon and O’Donoghue 2014).
As o accommoda ion, an OECD S a is ical B ie epo s ha housing p ices, along
wi h he sa ings a io, ep esen a key d i e o he le el o household weal h, as he
posi i e co ela ion be ween he median ne weal h o households and he annual eal
g ow h a e o house p ices is s ong in he long un (Mu in and Mi a d’E cole 2015,
p. 4). The ela ionship be ween income and weal h is also inﬂuenced in Eu ope by he
a ying impac ac oss clus e s o EU coun ies o he di e en o ms o housing enu e
(Kemeny 2001; C oci Angelini 2015). To compa e he s anda d o li ing o owne -occupie s
and enan s, he me hod adop ed by Eu os a consis s in he ”impu a ion” o a en o
owne s (ha ing sub ac ed he ac ual housing cos s). O e all, he adjus men pe o med
by means o he inclusion o impu ed en educes he deg ee o income inequali y. In
pa icula , he a - isk-o -po e y a e would all by ﬁ e pe cen age poin s in I eland and he
Uni ed Kingdom, ou in Es onia and Spain, and mo e han wo in Belgium, G eece, La ia,
and Po ugal (Sauli and Tö mäleh o 2010). Al hough home-owne ship disp opo iona ely
a ec s he well-being o high-income e sus low-income households, he impac o house
p ope y on a household’s ﬁnancial balances is he e ogeneous. On he one hand, he
owne -occupie beneﬁ s om a highe income, as he gains a hidden en (co esponding o
he sa ed en , which would ha e been paid o a landlo d); also, a e i ed wo ke li ing
in his own ﬂa , bu on he b ink o po e y because o a low pension, could use his house
o ob ain a loan om a bank so as o imp o e a poo li es yle. On he o he hand, he
loss in household equi alized income du ing a ecession is coun e ed in some coun ies
by o e ing home-owne ship as he colla e al o bo owing, while in o he coun ies he
mo gage associa ed wi h home-owne ship may wo sen al eady dis essed household
ﬁnances, mainly depending on he income le el o households and he na ional pe cen age
o home-owne ship (Sie minska 2012). In some EU coun ies he indica o s o housing
condi ions we e ound o be highly co ela ed wi h income, while he indica o s o ma e ial
dep i a ion usually p esen a s onge ela ionship wi h income han wi h housing condi-
ions, mainly as an e ec o ﬁnancial s ess (Nolan and Whelan 2010). Fu he mo e, he
sudden all in sho - e m income impac s e e yday li e, and a declining long- e m income
coun s mo e o housing condi ions and he social en i onmen ; simila ly, he deg ee o
dep i a ion is highe o ﬁnancial dis ess han o wo sening social en i onmen and
housing condi ions (Fusco e al. 2010).
In he esea ch e o aimed a e alua ing mul idimensional well-being (MWB), a
me hodological issue has o be ackled. The dimension-by-dimension app oach—a “la ge
and eclec ic dashboa d” (S igli z e al. 2009), o a “po olio o indica o s” (A kinson e al.
2002)—aims a p ese ing he in o ma ion on he in e pe sonal dispe sion o well-being in
each dimension. A syn he ic indica o may summa ize he o e all well-being a he cos
o igno ing possible in e ac ions ac oss dimensions. On his issue, he empi ical e idence
78
Economies 2024,12, 115
s emming om he EU-SILC da abase is unclea . On he one hand, he es ima e o h ee
indica o s—being a isk o po e y, li ing in a jobless household, and su e ing om
ma e ial dep i a ion—shows ha one- hi d o he indi iduals a e “disad an aged” in mo e
han one dimension (A kinson e al. 2010, p. 127). On he o he hand, e e ywhe e he e is a
low co ela ion be ween he income le el and he le el o dep i a ion; in pa icula , in some
coun ies a high le el o dep i a ion is associa ed wi h a low le el o po e y (A kinson
and Ma lie 2010). To compu e an index o each dimension a oids wo c i ical issues: he
no ma i e e alua ion o he weigh o be a ibu ed o each dimension, and he assessmen
o he deg ee o subs i u abili y among hem (Decancq and Lugo 2013).
3. Me hodology
Mul idimensional well-being (MWB) indices seek he impac on well-being s emming
om he mu ual ein o cemen o condi ions o en cha ac e ized by a high deg ee o
complemen a i y. The a iables hey ely upon seldom enjoy o hogonali y, a cha ac e is ic
he lack o which hinde s many quan i a i e analyses. The inpu s ace he p oblems o
iden i ying he ele an dimensions, ﬁnd indica o s able o desc ibe hem, and agg ega e he
indica o s in o a single ﬁgu e mean o ap ly desc ibe he mul idimensional phenomenon.
F om a heo e ical poin o iew, se e al cha ac e is ics a e needed, a equi emen ha has
been coped wi h by axioma ic me hodologies (Weyma k 2006). Empi ically, hey a e o en
based on su eys, such as he Eu opean Quali y o Li e Su ey (EQLS), whe e ques ions
a e posed by Eu o ound o housands o selec ed indi iduals. The que ies a e ob iously
designed o ﬁ he pu pose o he su ey, ye independen esea che s may use he da a o
hei own in es iga ions.
To compa e well-being in Eu opean coun ies be o e and a e he G ea Recession
we use da a om he EU-SILC da ase o he yea s 2007 and 2012. The da a—co e ing
26 coun ies
, among which 24 belong o he Eu opean Union and wo a e non-EU coun ies
(No way and Iceland)—a e comple e, i.e., all ele an a iables exis o bo h yea s and all
coun ies. Al hough Bulga ia, C oa ia, Mal a, and Romania a e EU membe s oday, hey
ha e been excluded o incomple e a ailabili y o da a. Ou uni s o analysis a e hese
26 Eu opean
coun ies: o each o hem he da ase includes se e al housand en ies, based
on bo h households and indi iduals, om which each coun y’s in o ma ion
is calcula ed
.
The P incipal Componen Analysis (PCA) sea ches o he unknown ac o s which a e
a he oo s o he well-being ou comes. This me hodology consis s o he compu a ion o
mu ually o hogonal p incipal componen s ( h ough he linea combina ions o he o iginal
a iables, i.e., he di e en indica o s conside ed o each dimension). A la ge numbe o
ini ial, possibly co ela ed, indica o s a e ans o med in o mu ually unco ela ed linea
combina ions. The p incipal componen s a e ex ac ed wi h he aim o iden i ying hidden,
unobse able a iables able o explain a majo po ion o he a iance. Hence, dispe sed
in o ma ion abou each indi idual en y is concen a ed in p incipal componen s, each one
summa izing he in o ma ion con eyed by a la ge se o indica o s. The cons uc ion o
composi e indices om indi idual indica o s helps in compa ing ac oss ime and space
he pe o mance o a uni based on a la ge amoun o in o ma ion (F eudenbe g 2003). The
PCA is a eliable me hod mean o o e come he ade-o be ween comp ehensi eness
(which comp esses he a ie y o dimensions o li e in o a syn he ic index) and meaning
(whe eby he ocus on he impac o he c isis on well-being p omp s p ese ing he dis inc
sho - e m e olu iona y pa h o well-being in each dimension) and so helps in weigh ing
pe o mances and de ising policies (Na do e al. 2008). To e alua e unobse able a iables
such as well-being o quali y o li e, an al e na i e me hod is he uzzy se app oach (Be i
2016) whe e he me hodological ocus is on he app op ia e weigh s, while ano he me hod
is by axioma ic measu emen , which keeps a desi able decomposi ion cha ac e is ic and
was p oposed in a p e ious pape (C oci Angelini and Michelangeli 2012).
Ou me hodological choice in a o o PCA was based on he educ ion o a iables
aimed a unde s anding he s uc u e unde lying a la ge lis o in e ela ed indica o s
in o de o educe hem o a small numbe o agg ega e syn he ic a iables. The sea ch
79
Economies 2024,12, 115
eac ed o he c isis by s uggling o keep he labo ma ke aﬂoa while educing bo h
dep i a ions and so each a posi ion nea o ze o a he c ossing o he wo componen s.
The poo pe o mance o Sou he n Eu opean coun ies s ands ou , as he c isis s uck
hem wo se o all. I aly and G eece a e in he “bad” quad an in 2007 and a e s ill he e in
2012, joined by Cyp us, and agg a a e hei condi ions u he away om he ze o. Spain
and Po ugal show imp o emen s in he labo ma ke a he expense o mo e dep i a ions
caused by de egula ion.
In hese coun ies he c isis is a om o e also in he ollowing yea s. Al hough i
has no been possible o compu e a ecen compa able PCA o he lack o some a iables,
Sou he n coun ies need a leas h ee mo e yea s (Po ugal) o eco e ma e ial dep i a ion
le els, while G eece so a has no ye eco e ed. As o he labo ma ke - ela ed componen ,
unemploymen a es in Spain and in G eece we e s ill o e 10% in 2018. No o he coun y
shows he same eco d.
Ou esul s a e also la gely cohe en wi h he ﬁndings o I ano áe al. (2022) who
explo e EU quali y o li e h ough 19 EU-SILC based a iables and employ PCA o educed
hem o ﬁ e ac o s (ma e ial-economic condi ions, social con ac s and exis en ial issues,
en i onmen al issues and quali y o en i onmen , heal h limi a ions, and c ime), which a e
he mos impo an ac o s a ec ing EU inhabi an s’ quali y o li e. Thei s udy shows he
maximum posi i e co ela ion (0.93) be ween households making ends mee wi h g ea
di ﬁcul y and a ea s (mo gage o en , u ili y bills, o hi e pu chase); also, he quali y o
li e has been ound o be subs an ially nega i ely inﬂuenced by social insecu i y mainly as
an e ec o economic sa e y.
The esea ch wo k by Mazu ek (2016) ca ied ou on qua e ly mac oda a and in e -
es ed in he magni ude and shape o he G ea Recession on 25 EU coun ies conﬁ ms ou
ﬁndings ha he pe iphe y o Eu ope (i.e., mainly Eas and Sou h) has been he a ea mos ly
hi by he G ea Recession.
Finally, as o he emaining heal h- ela ed componen s, i is pe haps wo h men ioning
ha he pe o mance o none o he Sou he n coun ies was in dange in 2007 ( oge he
wi h he No dic and some o he coun ies), while i was in Po ugal in 2012.
All in all, ou analysis sugges s ha he coun ies wi h bo h mos aluable economic
s uc u e and socio-economic indica o s—again he Wes e n con inen al and he No dic
coun ies—ha e shown a ema kable esilience du ing he pe iod ollowing he ﬁnancial
c isis, conﬁ ming hei pe o mance bo h o componen 1 and 2. A signiﬁcan excep ion is
he UK, which is singled ou o he wo sening o componen 2.
Indeed, as shown in Be i (2016) he mos ele an change happens in each single
g oup o quali y o li e a he han in he o e all index.
6. Conclusions
The abo e discussion on he e olu ion o well-being in Eu ope indica es ha he
G ea Recession has consolida ed he di ision ac oss he ou g oups o coun ies. On he
one hand we see ha he Cen al-Wes e n and No dic coun ies we e able o eac o he
wo sening socio-economic condi ions; on he o he hand he Cen al-Eas e n coun ies’
con e gence has s opped and he Sou he n coun ies ha e u he been le behind. The UK
is a case in poin as i s pe o mance has wo sened a e B exi in 2016. In o he wo ds, he
c isis has nega i ely impinged on he capaci y o na ional and sup ana ional ins i u ions in
sus aining he ma ke in eg a ion p ocess. The e olu ion o he well-being condi ions has
been limi ed o a s eng hening o ma ke in eg a ion wi hin he ou g oups o coun ies.
Due o he impac o he c isis he objec i e o socio-economic con e gence has been
se aside.
The pu pose o his pape was o e alua e a ia ions in agg ega e economic wel a e
wi hin 26 Eu opean coun ies, by connec ing he impac on he main dimensions o well-
being o he G ea Recession, which was e y he e ogeneous ac oss Co e, Pe iphe al, and
Cen al-Eas e n Eu ope in pa icula a he bo om o he income dis ibu ion.
86

Economies 2024,12, 115
In some dimensions, such as isk o po e y, unemploymen , and ma e ial dep i a ion,
whe e a ecession ypically p o okes nega i e e ec s in he sho un, e idence shows
ha he c isis has wo sened he well-being o a sizable numbe o households, mainly in
Sou he n and Cen al-Eas e n Eu ope. In some o he dimensions, such as heal h condi ions,
educa ional achie emen s, and housing, he impac o he c isis is no pa icula ly ele an .
In he Eu opean Union, hese indica o s ega d mainly publicly p o ided se ices, which
a e less subjec o he decay ha has hi au oma ic s abilize s a e he nega i e ﬁscal
impulses imposed by B ussels o epai dis essed public ﬁnances. Typically, he possibly
impac o he G ea Recession on hese dimensions could be assessed only in he medium
e m, in case he size o he cu o public expendi u es would be so la ge as o g a ely
wo sen he p o ision o hese essen ial me i goods.
The esul s o ou pape can be compa ed wi h hose eached by s udies aimed a
he e alua ion o he e ec s o he G ea Recession on Eu opean coun ies (e.g., Mazu ek
2016; Fedo enko e al. 2024) and o he coun ies’ pe o mance owa ds he EU2020 a ge s
(
e.g., G imaccia 2021
). O e all, ou esul s a e compa ible wi h hem, al hough he aims,
scope, and me hods may di e .
As o he me hod, PCA was applied by I ano áe al. (2022) o e 19 a iables o
assess he quali y o li e in membe coun ies o he Eu opean Union in eigh dimensions
educed o he ﬁ e mos impo an ac o s. The ad an age o his me hod lies in he way
ha a wide amoun o in o ma ion is summa ized in ew majo componen s which may
be mo e impo an o policy ad ice a he han a single ﬁgu e ha is only able o ank
he coun ies.
Au ho Con ibu ions:
Concep ualiza ion, E.C.A., F.F. and S.S.; me hodology, E.C.A. and S.S.; so -
wa e, S.S.; alida ion, E.C.A. and S.S.; o mal analysis, S.S.; in es iga ion, S.S.; esou ces, S.S.; da a
cu a ion, E.C.A.; w i ing—o iginal d a p epa a ion, F.F.; w i ing— e iew and edi ing, F.F.; isualiza-
ion, S.S.; supe ision, E.C.A.; p ojec adminis a ion, E.C.A.; unding acquisi ion, E.C.A. and S.S. All
au ho s ha e ead and ag eed o he published e sion o he manusc ip .
Funding: This esea ch ecei ed no ex e nal unding.
Da a A ailabili y S a emen :
All EU-SILC da a employed in his pape a e a ailable a h ps://ec.
eu opa.eu/eu os a /web/income-and-li ing-condi ions/in o ma ion-da a (accessed on
6 May 2024
).
Acknowledgmen s:
While aking join esponsibili y o his pape he au ho s g a e ully acknowl-
edge he suppo , discussion, and aluable commen s by Fabio Clemen i, C is ina Da ino, and Enzo
Valen ini. We also hank he anonymous e e ees.
Conﬂic s o In e es : The au ho s decla e no conﬂic s o in e es .
Appendix A
In 2007, he 11 indica o s lis ed in he ﬁ s column o Table A1 we e educed in o he
h ee componen s whose explana o y powe is p esen ed in Table 4.
Table A1. Ro a ed componen ma ices a o he yea s 2007 band 2012 c.
1s Componen 2nd Componen 3 d Componen 4 h Componen
2007 2012 2007 2012 2007 2012 2007 2012
1. Se e e housing dep i a ion 0.750 0.095 0.269 0.772 0.324 0.376 - 0.173
2. Su e om ch onic illness 0.021 −0.224 −0.144 −0.102 0.870 0.264 - 0.835
3. Unme medical ea men 0.900 0.126 0.011 0.320 0.177 0.826 - 0.133
4. Unme den al ea men 0.896 0.241 −0.196 0.087 −0.033 0.899 -−0.101
5. Ac i i ies limi ed by bad heal h
0.232 0.028 0.186 0.181 0.834 −0.231 - 0.895
87
Economies 2024,12, 115
Table A1. Con .
1s Componen 2nd Componen 3 d Componen 4 h Componen
2007 2012 2007 2012 2007 2012 2007 2012
6. Po e y isk 0.555 0.749 0.291 0.376 −0.076 0.055 - −0.076
7. Ex eme ma e ial dep i a ion 0.825 0.208 0.334 0.891 0.190 0.275 - −0.001
8. Unemploymen −0.051 0.883 0.855 0.269 0.368 0.122 - −0.062
9. Unde employmen 0.372 0.691 0.642 0.236 0.027 0.428 - −0.177
10. Tempo a y jobs −0.092 0.730 0.735 −0.395 −0.297 0.126 - 0.004
11. NEETs 0.344 0.071 0.792 0.535 0.034 −0.001 - −0.014
Sou ce: Own calcula ions on EU-SILC 2007 and EU-SILC 2012 da ase .
a
Numbe s in bold iden i y he i ems com-
posing he di e en componen s a e he con e gence by Va imax me hod o o a ion and Kaise no maliza ion.
b o a ion eached con e gence c i e ia in 4 i e a ions. cRo a ion eached con e gence c i e ia in six i e a ions.
Table A2 shows how he 26 coun ies con ibu e o he h ee (2007) o ou
(2012) componen s.
Table A2. Coun ies’ con ibu ions o he p incipal componen s.
Coun y 2007 1s
Componen
2012 1s
Componen
2007 2nd
Componen
2012 2nd
Componen
2007 3 d
Componen
2012 3 d
Componen
2012 4 h
Componen
AT Aus ia −0.8119 −0.7708 −0.05874 0.2812 0.04249 −1.20.05 0.11156
BE Belgium −0.91417 −0.26396 0.52803 −0.28846 −0.37991 −0.87335 −1.05017
CY Cyp us 0.53777 0.41449 −0.37921 0.19816 −1.00462 0.18321 −0.74536
CZ Czechia −0.83171 −0.86943 0.69367 0.09863 −0.01061 −0.52352 −0.43346
DE Ge many −0.2344 −0.05314 −0.20694 −0.65822 1.24639 −0.74793 1.45954
DK Denma k −0.51385 −0.6477 −1.49942 −0.37235 −0.30065 −0.14205 0.08512
EE Es onia 1.07845 −0.47987 −1.03448 0.7549 1.5694 0.32549 1.36469
EL G eece 0.52409 1.98103 1.6437 1.08254 −1.72526 −0.04791 −0.82843
ES Spain −0.60796 3.14244 1.63703 −1.26.12 −1.08996 −0.27919 −0.43654
FI Finland −1.24456 0.04651 0.38496 −0.90573 1.95109 0.02104 2.58969
FR F ance −0.5454 −0.07848 0.75137 −0.78641 0.07443 0.39423 0.25036
HU Hunga y 0.79412 −0.45669 0.85781 2.01621 0.91443 0.58656 0.18496
IE I eland −0.47203 0.5942 0.40587 −0.0914 −0.94683 −0.33155 −1.40245
IS Iceland 0.15807 −1.18332 −1.64814 −1.17504 −2.09799 1.47602 −0.74238
IT I aly 0.46134 0.77587 0.72078 0.86241 −0.92076 −0.14621 −0.3447
LT Li huania 1.21276 −0.0457 −0.29146 1.82744 0.36067 −1.18555 −0.40005
LU
Luxembu g
−0.6931 −0.5774 −0.91574 −0.45614 −0.45531 −0.83776 −1.5566
LV La ia 3.31357 −0.2101 −0.41543 1.97079 0.7569 2.7584 0.5087
NL
Ne he lands
−0.64051 −0.82843 −1.51746 −0.9206 0.0243 −0.78992 0.82626
NO No way −0.2299 −1.36951 −0.96034 −1.1438 −0.54461 0.52326 −1.20646
PL Poland 1.38332 0.36321 1.47278 0.36934 −0.0028 1.02713 0.33069
PT Po ugal 0.16762 1.45223 1.26733 −0.96893 0.53069 1.33337 0.26141
SE Sweden 0.22784 −0.53582 −0.88212 −1.39502 −0.0403 1.49465 −0.41712
SI Slo enia −1.31893 0.4255 0.29688 −0.11817 1.7861 −1.32586 1.71076
SK Slo akia −0.47952 0.03088 0.34155 0.39451 0.30933 −0.70355 0.4685
UK Uni ed
Kingdom −0.32102 −0.85603 −1.19227 0.68525 −0.04663 −0.98394 −0.58852
Sou ce: Own calcula ions on EU-SILC 2007 and EU-SILC 2012 da ase .
In Figu e A1 he ﬁ s and second componen o bo h yea s a e plo ed in he sca e
diag ams 2007 (a) and 2012 (b) in o ou quad an s. Coun ies ha ha e he hea ies
p oblems a e ep esen ed in he uppe igh quad an , while coun ies ha a e be e a e
in he double nega i e lowe le quad an . The wo diag ams compa e he wo yea s wi h
a wa ning: in 2007, he ﬁ s and second componen s oge he explain mo e han hal he
a iance (56%), while in 2012 hey only each 43,5%. A h ee-dimensional diag am o 2012
would each 62% (and nea ly 73% in 2007) bu would no be as eade - iendly.
88
Economies 2024,12, 115
ȱ
(a)ȱ2007ȱ(b)ȱ2012ȱ
Figu e A1.
Sca e plo o he ﬁ s and second componen o he 26 coun ies, yea 2007 (
a
) and
2012 (b).
The ﬁ s componen is measu ed on he ho izon al axis and he second componen on
he e ical axis. Coun ies ep esen ed on he le quad an s show nega i e alues o he
ﬁ s componen s (i.e., hey end no o be dep i ed in 2007, no ha e majo p oblems on
he labo ma ke in 2012), while coun ies in he lowe quad an s show nega i e alues o
he second componen . The e o e, coun ies ha ing bo h nega i e alues end o a e be e
han all he es , while coun ies ha ing bo h posi i e alues end o be mo e mise able
han he emaining coun ies.
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Disclaime /Publishe ’s No e:
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91

Ci a ion: Da idescu, Ad iana
AnaMa ia, Oana-Ramona Lobon¸ ,
and Tama a Ma ia Nae. 2024. The
Fab ic o T ansi ion: Un a eling he
Wea e o Labo Dynamics, Economic
S uc u es, and Inno a ion on Income
Dispa i ies in Cen al and Eas e n
Eu ope Na ions. Economies 12: 68.
h ps://doi.o g/10.3390/economies
12030068
Academic Edi o : Fabio Clemen i
Recei ed: 12 Decembe 2023
Re ised: 28 Feb ua y 2024
Accep ed: 4 Ma ch 2024
Published: 14 Ma ch 2024
Copy igh : © 2024 by he au ho s.
Licensee MDPI, Basel, Swi ze land.
This a icle is an open access a icle
dis ibu ed unde he e ms and
condi ions o he C ea i e Commons
A ibu ion (CC BY) license (h ps://
c ea i ecommons.o g/licenses/by/
4.0/).
economies
A icle
The Fab ic o T ansi ion: Un a eling he Wea e o Labo
Dynamics, Economic S uc u es, and Inno a ion on Income
Dispa i ies in Cen al and Eas e n Eu ope Na ions
Ad iana AnaMa ia Da idescu 1,2,*, Oana-Ramona Lobon¸ 3and Tama a Ma ia Nae 4,5
1Depa men o S a is ics and Econome ics, The Facul y o Economic Cybe ne ics, S a is ics and In o ma ics,
The Bucha es Uni e si y o Economic S udies, 010552 Bucha es , Romania
2
Depa men o Educa ion, T aining and Labou Ma ke , Na ional Scien iﬁc Resea ch Ins i u e o Labou and
Social P o ec ion, 010643 Bucha es , Romania
3Depa men o Finance, Facul y o Economics and Business Adminis a ion, Wes Uni e si y o Timisoa a,
300223 Timisoa a, Romania; [email p o ec ed]
4Depa men o Economics and Economic Policies, Facul y o Theo e ical and Applied Economics,
Bucha es Uni e si y o Economic S udies, 010552 Bucha es , Romania; [email p o ec ed]
5Resea ch and Analysis Depa men , Minis y o Finance, 050706 Bucha es , Romania
*Co espondence: ad iana.alexand [email p o ec ed]
Abs ac :
In ecen yea s, he issue o income inequali y has ascended o he o e on o na ional and
in e na ional agendas, unde sco ed by he u gency o na iga e he complexi ies o ma ke -d i en
economies wi hou exace ba ing social dispa i ies. These challenges a e pa icula ly p onounced
in he pos -communis na ions o Cen al and Eas e n Eu ope, whe e he ansi ion legacy and he
ma ke iza ion o ces p esen unique dynamics in he e olu ion o income dispa i ies. This esea ch
in es iga es he in ica e mechanisms h ough which ma ke iza ion impac s income inequali y wi hin
he Cen al and Eas e n Eu opean coun ies con ex , aiming o unco e how economic ans o ma ions
inﬂuenced by global sus ainabili y goals can con ibu e o na owing he income gap. By employing
panel da a es ima ion echniques and Gene alized Me hod o Momen s (GMM) analysis, his s udy
highligh s he endu ing na u e o income dispa i ies and he c i ical oles played by economic g ow h,
educa ion in es men , labo ma ke e o ms, globaliza ion, and go e nance quali y in shaping
equi able income dis ibu ions. Findings e eal ha , despi e he compe i i e na u e o ma ke
economies po en ially c ea ing dispa i ies, s a egic policy in e en ions in educa ion, economic
policy, and labo ma ke egula ions can mi iga e he ad e se e ec s o ma ke iza ion on income
inequali y. Addi ionally, his esea ch emphasizes he impo ance o s ong ins i u ional amewo ks
and he nuanced ole o he in o mal economy in inﬂuencing income dis ibu ion dynamics.
Keywo ds:
income inequali y; de e minan s; CEE coun ies; panel da a app oach; GMM; social
p og ess; con e gence
1. In oduc ion
Inequali y has been he subjec o a g ea deba e a all imes. This phenomenon has
gained pa icula in e es among economis s since he economic down u ns ha hi Eu ope
a e he mos signiﬁcan wa e o accession. Concu en ly, he e has been a heigh ened
emphasis in esea ch on income dis ibu ion, which is cu en ly eme ging as a p og essi ely
u gen economic and social conce n. This is especially no able in eme ging Eu opean
na ions, whe e inequali ies su pass he mean obse ed in he Eu opean Union (EU).
In he a e ma h o he collapse o communis egimes in Cen al and Eas e n Eu ope,
he in e play be ween income inequali y and ma ke iza ion has wi nessed signiﬁcan
changes. The shi om cen ally planned o ma ke -d i en economies in he egion
has p esen ed bo h oppo uni ies and challenges. While ma ke iza ion has s imula ed
economic g ow h, os e ing an o e all inc ease in p ospe i y and he eme gence o a
Economies 2024,12, 68. h ps://doi.o g/10.3390/economies12030068 h ps://www.mdpi.com/jou nal/economies
92
Economies 2024,12,68
g owing middle class, he swi implemen a ion o ma ke e o ms has concu en ly gi en
ise o a ying le els o income inequali y. Ce ain segmen s o he popula ion ha e been
mo e adep a le e aging new economic oppo uni ies, leading o dispa i ies ha need
ca e ul conside a ion.
Reducing income inequali y in Cen al and Eas e n Eu opean coun ies holds pa amoun
signi icance o os e ing sus ainable de elopmen , social cohesion and esilience. High le els
o income inequali y can unde mine a egion’s economic po en ial by limi ing access o edu-
ca ion, heal hca e, and oppo uni ies o a signi ican po ion o he popula ion. Add essing
inequali y con ibu es o poli ical s abili y and a mo e inclusi e socie y. Mo eo e , a mo e eq-
ui able dis ibu ion o income can s imula e domes ic demand, os e ing a obus and esilien
economy. As CEE na ions con inue o na iga e he challenges o ansi ion and ma ke iza ion,
p io i izing policies ha educe income dispa i ies becomes c ucial o building a p ospe ous
and ha monious u u e o hei ci izens.
The genesis o his s udy is oo ed in he pe sis en challenges pe aining o inequali y,
no ably disce nible wi hin he Eu opean Union and accen ua ed wi hin CEE coun ies. The
esea ch is mo i a ed by he iden iﬁca ion o a comp ehensi e se o policy ecommen-
da ions designed o amelio a e he social landscape in CEE na ions, wi h a s a egic aim
o mi iga ing and ul ima ely e adica ing he socio-economic dispa i ies be ween Eas e n
Eu ope and he es o Eu opean Union.
This pape con ibu es signiﬁcan added alue o he exis ing li e a u e by o e ing a
nuanced examina ion o he complex in e play be ween ma ke iza ion, income inequali y,
and ins i u ional quali y, wi h a speciﬁc ocus on pos -communis coun ies in CEE. The
s udy no only in es iga es he impac o ma ke iza ion on income dis ibu ion bu also
in eg a es he c ucial dimension o ins i u ional quali y, p o iding a mo e comp ehensi e
unde s anding o he ac o s inﬂuencing inequali y dynamics in he CEE egion. By iden-
i ying key policy ecommenda ions ailo ed o he unique socio-economic landscape o
CEE coun ies, his pape o e s ac ionable insigh s o policymake s s i ing o add ess
and mi iga e income dispa i ies.
This pape adop s a sys ema ic s uc u e, commencing wi h an insigh ul in oduc ion
ha a icula es he esea ch p oblem’s signiﬁcance and delinea es he s udy’s objec i es.
Subsequen ly, his li e a u e e iew me iculously examines exis ing schola ship, es ab-
lishing a obus heo e ical amewo k. The Da a and Me hodology sec ion ou lines he
esea ch design, da a sou ces, and analy ical app oach, encompassing he nuanced explo-
a ion o andom e ec s, ﬁxed e ec s, and igo ous endogenei y es ing echniques. Mo ing
o wa d, he Resul s and Discussion sec ion syn hesizes empi ical ﬁndings, di e en ia ing
be ween andom and ﬁxed e ec s. The conclusion succinc ly summa izes key ﬁndings,
unde sco es hei con ibu ions o he exis ing body o knowledge, and p opounds a enues
o u u e esea ch. Addi ionally, he pape culmina es wi h judicious policy ecommenda-
ions, de i ing p ac ical implica ions om he s udy’s insigh s and o e ing guidance o
decision make s in ele an domains. This cohesi e s uc u e ensu es a logical p og ession
o ideas, acili a ing a comp ehensi e and impac ul p esen a ion o he esea ch.
2. Li e a u e Re iew
2.1. Ma ke iza ion and Income Inequali y: A Complex Nexus
The ela ionship be ween ma ke iza ion and income inequali y is highly con ex ual,
showing a iance ac oss di e en coun ies and egions. This a iance is la gely shaped
by speciﬁc policy measu es, ins i u ional amewo ks, and socio-economic condi ions
unique o each con ex . Schola s ha e unde sco ed he c i ical impo ance o conside ing
he dis ibu i e impac s o ma ke -o ien ed policies, which include changes in access o
educa ion, social p o ec ion, and employmen oppo uni ies. The consensus om hese
s udies sugges s an in ica e and mul i ace ed link be ween income inequali y and ma ke i-
za ion, highligh ing he necessi y o a nuanced unde s anding ha accommoda es a b oad
spec um o con ex ual ac o s.
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Economies 2024,12,68
2.2. Labo Ma ke Dynamics and Thei Dispa a e Impac s
The labo ma ke plays a pi o al ole in inﬂuencing income inequali y, wi h echnolog-
ical ad ancemen s and shi s in he demand o skilled labo con ibu ing signiﬁcan ly o
wage dispa i ies. Acemoglu and Au o (2011) and Pike y (2014) p o ide e idence o how
economic g ow h pe iods and echnological shi s exace ba e income inequali y. Goldin and
Ka z (2007) u he his discussion by emphasizing he exace ba ing ole o educa ion and
skill di e en ials wi hin he labo ma ke . The impo ance o labo ma ke policies, such as
minimum wage egula ions and social p o ec ion measu es in shaping income dis ibu ion,
is highligh ed by A kinson and Mo elli (2010), wi h Che y e al. (2014) discussing he
pe sis ence o inequali ies ac oss gene a ions due o labo ma ke oppo uni ies.
Ca d and K uege (1994) and Au o e al. (2008) del e in o he e ec s o minimum
wage policies and labo ma ke pola iza ion, unde sco ing he signiﬁcance o educa ional
composi ion in he wo k o ce and i s impac on income dispa i ies. The dis ibu ion o
employees ac oss indus ies, as discussed by Goos and Manning (2007), demons a es
how echnological ad ancemen s ha e led o he decline in middle-skilled jobs, u he
inc easing income inequali y.
2.3. Economic Pe o mance, S uc u e, and Income Inequali y
The in ica e ela ionship be ween economic g ow h and income inequali y has cap-
u ed schola ly a en ion, wi h mixed ﬁndings ega ding i s impac s. Ba o (2000) and
Fo bes (2000) explo e his ela ionship, while Be g and Os y (2011) sugges ha ex eme
income dispa i ies may dis up economic s abili y. Pe sson and Tabellini (1994) unde sco e
he media ing ole o ins i u ional quali y in his ela ionship, p oposing ha well-designed
ins i u ions can alle ia e he ad e se e ec s o inequali y on de elopmen .
2.4. Openness o he Economy: A Double-Edged Swo d
The in e play be ween economic openness and income inequali y has been ex ensi ely
s udied, wi h Rod ik (1997) and Milano ic (2005a, 2005b) discussing how ade libe al-
iza ion and globaliza ion can ini ially inc ease income inequali y. Be gs and and Egge
(2007), along wi h Fi ebaugh and Goesling (2004), emphasize he con ingen na u e o his
ela ionship on ac o s like de elopmen le el and ins i u ional quali y.
2.5. Shadow Economy and Income Dispa i ies
The shadow economy’s ole in inﬂuencing income inequali y is highligh ed by Schnei-
de and Ens e (2000) and To gle and Schneide (2007), no ing he in o mal sec o ’s con-
ibu ion o wage dispa i ies and he g ow h o in o mal employmen d i en by income
inequali y. Buehn and Schneide (2012) s ess he impo ance o he ins i u ional con ex in
unde s anding hese dynamics.
2.6. Technological Ad ancemen s and High-Tech Expo s
The li e a u e on high- ech expo s and income inequali y p esen s a nuanced iew,
wi h Lin and Li (2011) and Gou ea and Wang (2019) discussing he sec o ’s po en ial o bo h
exace ba e and mi iga e income dispa i ies. The impo ance o in es men s in educa ion
and echnology in na owing skill di e en ials is no ed by Ba o (2000), wi h Li and Liu
(2005) cau ioning abou he une en beneﬁ s o high- ech expo s.
2.7. Go e nance, Ins i u ional Quali y, and Income Dis ibu ion
The ole o go e nance and ins i u ional quali y in add essing income inequali y is
emphasized by Acemoglu and Robinson (2012) and Kau mann e al. (2010), highligh ing
he impo ance o s ong ins i u ions in p omo ing equi able esou ce dis ibu ion. Mu in
and Waczia g (2014) p o ide empi ical e idence linking imp o emen s in ins i u ional
quali y o educ ions in income inequali y.
Despi e ex ensi e esea ch on indi idual ma ke iza ion ac o s and hei impac on
income inequali y, he e exis s a no able gap in s udies ha p o ide a holis ic analysis
94
Economies 2024,12,68
in eg a ing hese elemen s in o a uniﬁed amewo k. The cu en li e a u e o en exam-
ines hese aspec s in isola ion, lacking a comp ehensi e unde s anding o he syne gies
and in e ac ions among ma ke iza ion componen s and hei collec i e inﬂuence on in-
come dis ibu ion. The e’s a c i ical need o esea ch ha b idges hese gaps, o e ing
an in eg a ed pe spec i e ha encompasses he dynamic in e play among labo ma ke
dynamics, economic pe o mance, echnological shi s, and ins i u ional amewo ks in
shaping income inequali y ou comes. Add essing his oid is impe a i e o policymake s
and schola s seeking a ho ough comp ehension o ma ke iza ion’s mul i ace ed impac on
income dis ibu ion.
The desc ip ion o he a iables ha will be used in he empi ical analysis can be
s udied in (Table 1).
Table 1. Lis o he a iables and da a sou ce.
Va iable Sou ce Sign
Endogenous
Gini Coe ﬁcien (pp) Eu os a da a base −
Exogenous a iable
Economic Pe o mance and Labo ma ke
Minimum mon hly wage (%) Eu os a da a base −
S ic ness o employmen p o ec ion index,
indi idual and collec i e dismissals (%)
Employmen P o ec ion
Da abase, OECD −
G oss domes ic p oduc pe capi a (eu o/cap.) Eu os a da a base (+/−)
Economic g ow h/cap. (%) Eu os a da a base (+/−)
Employed popula ion wi h e ia y educa ion (%) Eu os a da a base −/+
Employees in he indus y (%) Eu os a da a base −
Educa ion expendi u e (% GDP) Eu os a da a base (−)
In o mal economy (% GDP) Global Economy (−/+)
Globaliza ion
Sha e o high- ech expo s (%) o To al Expo s Eu os a da a base +/−
Inno a ion index (%) Global Economy (+/−)
Openness o he economy (% GDP) Eu os a da a base (+/−)
Quali y o ins i u ions
Regula o y quali y (pp) Wo ld Bank (−)
Rule o law (pp) Wo ld Bank (−)
Con ol o Co up ion (pp) Wo ld Bank (−/+)
3. Da a and Me hodology
Add essing social issues and enhancing ai income dis ibu ion necessi a es a deep
di e in o he ac o s inﬂuencing income dispa i y. This explo a ion is c ucial o os e -
ing b oade socio-economic inclusion, ele a ing he gene al quali y o li e, and ensu ing
economic and social s abili y, which in u n, s eng hens socio-economic cohesion and
esilience agains u u e c ises.
The empi ical componen o his s udy ze oes in on he de e minan s o income in-
equali y wi hin en CEE coun ies, excluding C oa ia due o da a limi a ions. U ilizing
panel da a eg ession analysis, he esea ch co e s annual da a om 2008 o 2019, dissec ing
he inﬂuence o iden iﬁed de e minan s ac oss ou main ca ego ies: labo ma ke ins i-
u ions, economic de elopmen , globaliza ion, and go e nance. The model employed is
gi en by:
95
Economies 2024,12,68
Table 3. Con .
M1 M2 M3 M4 M5 M6
Quali y o ins i u ions
No. o ins umen s (g oups) 10 10 10 10 10 10
Obs.no. 120 120 120 120 120 120
No e: Wi hin he able, he coe icien s a e displayed oge he wi h s anda d e o s and he p obabili ies wi hin (). S anda d
e o s a e ypically displayed in pa en heses igh below he coe icien s o indica e hey a e ela ed bu dis inc alues.
5. Conclusions
The in es iga ion in o he e ec s o ma ke iza ion on income inequali y ac oss CEE
o e s c i ical insigh s, syn hesizing empi ical e idence wi h dynamic panel da a and GMM
analysis. This eﬁned unde s anding leads o se e al key conclusions:
The p onounced pe sis ence o income inequali y, as highligh ed by he lagged income
inequali y a iable’s signiﬁcance, unde sco es he ch onic na u e o dispa i ies wi hin
CEE na ions. This e ela ion unde sco es he impe a i e o endu ing, s a egic policy
in e en ions designed o comba income inequali y e ec i ely.
Conﬁ ming he pi o al oles o economic g ow h and inc eased alloca ions o educa-
ion, his s udy ad oca es o policies ha bols e economic de elopmen while signiﬁcan ly
in es ing in educa ion. Such ini ia i es p omise o os e equi able income dis ibu ions,
enhance job quali y, and b oaden educa ional oppo uni ies.
The nuanced impac s o minimum wage adjus men s and he unequi ocally posi i e
inﬂuence o employmen p o ec ion and ac i e labo ma ke ini ia i es illus a e he essen-
ial na u e o hough ul labo ma ke policies. These ﬁndings ad oca e o measu es ha
upli low-income wo ke s and p omo e inclusi i y wi hin he labo ma ke .
The associa ion be ween educed income inequali y wi h high echnology expo s
and economic openness speaks o globaliza ion’s mul i ace ed ole in os e ing equi able
income dis ibu ion. This highligh s he oppo uni ies globaliza ion p esen s o inclusi e
g ow h, emphasizing s a egic global in eg a ion.
This s udy illumina es he indispensable ole o go e nance, wi h s ong ins i u ions
ma ked by ule o law and an i-co up ion e o s eme ging as c ucial o mi iga ing income
dispa i ies. S eng hening go e nance and ins i u ional in eg i y is amed as a co ne s one
s a egy in add essing income inequali y.
The shadow economy’s complex inﬂuence on income inequali y highligh s he in ica e
balance needed in in eg a ing he in o mal sec o wi h he o mal economy. C a ing
s a egies ha ha ness he in o mal sec o ’s po en ial while cu bing i s ad e se e ec s is
pi o al o equi able g ow h.
In sum, his s udy no only en iches he academic dialogue on income inequali y
wi hin he con ex o CEE coun ies bu also p o ides ac ionable insigh s o policymake s.
By delinea ing he mechanisms h ough which ma ke iza ion ac o s inﬂuence income
dis ibu ion, i unde sco es he c i ical need o a ge ed, in eg a ed policy in e en ions
ha span economic, educa ional, labo , and go e nance domains o cul i a e a mo e
inclusi e, equi able economic landscape.
While his s udy con ibu es aluable insigh s in o income inequali y wi hin CEE coun-
ies, ce ain limi a ions mus be acknowledged. The exclusion o coun ies like C oa ia
due o insu ﬁcien da a highligh s he b oade issue o da a limi a ions in pos -communis
na ions, emphasizing he challenges associa ed wi h comp ehensi e egional analyses.
Addi ionally, despi e he s udy’s ex ensi e co e age, i may no cap u e all ele an ma ke-
iza ion ac o s and hei nuanced in e ac ions. Fac o s such as echnological inno a ion,
demog aphic shi s, and in e na ional ade dynamics wa an u he explo a ion o a
comp ehensi e unde s anding. Fu he mo e, he ocus on CEE coun ies, while p o iding
essen ial egional con ex , aises conce ns abou he gene alizabili y o he ﬁndings o o he
global con ex s. The unique his o ical, economic, and social ajec o ies o CEE na ions
unde sco e he need o cau ion when applying hese esul s beyond he s udied egion.
102

Economies 2024,12,68
Fu u e esea ch endea o s in he ealm o income inequali y wi hin CEE coun ies
could p io i ize enhanced da a collec ion e o s, pa icula ly in na ions cu en ly acing
da a limi a ions. Addi ionally, u u e esea ch could del e in o e alua ing he e ec i eness
o speciﬁc policy in e en ions wi hin he CEE con ex , con ibu ing o a mo e a ge ed and
e idence-based app oach o educing income inequali y in he egion.
Social implica ions: The ﬁndings highligh he impo ance o inclusi e g ow h ha
beneﬁ s a b oade segmen o he popula ion. By add essing income inequali y, coun ies
can imp o e social cohesion, educe po e y a es, and enhance he o e all quali y o li e
o hei ci izens. This app oach aligns wi h he pu sui o he Sus ainable De elopmen
Goals, pa icula ly Goal 10, which ocuses on educing inequali ies.
Economic implica ions: Add essing income inequali y is no jus a ma e o social
jus ice bu also economic e ﬁciency. High le els o inequali y can hinde economic g ow h,
c ea e economic ins abili y, and was e human capi al. Policies ha os e a mo e equi able
income dis ibu ion can lead o a mo e sus ainable and obus economic sys em.
Au ho Con ibu ions:
Concep ualiza ion, A.A.D. and O.-R.L. and A.A.D.; me hodology, A.A.D.
so wa e, A.A.D., T.M.N.; alida ion, A.A.D., O.-R.L. and T.M.N.; o mal analysis, O.-R.L.; in es iga-
ion, A.A.D.; esou ces, A.A.D.; da a cu a ion, T.M.N.; w i ing—o iginal d a p epa a ion, A.A.D.,
T.M.N.; w i ing— e iew and edi ing, A.A.D., T.M.N.; isualiza ion, O.-R.L.; supe ision, A.A.D.;
p ojec adminis a ion, A.A.D.; unding acquisi ion, A.A.D. All au ho s ha e ead and ag eed o he
published e sion o he manusc ip .
Funding:
This esea ch s udy has been elabo a ed wi hin he Da a Science Resea ch Lab o Business
and Economics o he Bucha es Uni e si y o Economic S udies.
Ins i u ional Re iew Boa d S a emen : No applicable.
In o med Consen S a emen : No applicable.
Da a A ailabili y S a emen : Da a can be a ailable upon eques .
Conﬂic s o In e es : The au ho s decla e no conﬂic s o in e es .
Abb e ia ions
Ac onyms o he a iable.
Ac onym The Name o he Va iable
GINI COEF Gini Coe ﬁcien
MMWBI Minimum mon hly sala y, annual a e age
GDP/cap. G oss domes ic p oduc pe capi a
ECG/cap. Economic g ow h/cap
TERED Employed popula ion wi h e ia y educa ion
EMP_IND Employees in he indus y
ED_SPEND Educa ion expendi u e
INNOV Inno a ion index
HIGHTECHXP Sha e o high- ech expo s
OPENESS Openness o he economy
REG_QUAL Regula o y quali y
RULE_OF_LAW Rule o law
CONT_CORR Con ol o Co up ion
SHADOW_EC In o mal economy
URB U baniza ion deg ee
EMP_SEV Employees in he se ices sec o
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A kinson, An hony Ba nes, and Sal a o e Mo elli. 2010. Inequali y and labo ma ke ins i u ions. Handbook o Income Dis ibu ion 2:
1059–143.
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Au o , Da id H., Law ence F. Ka z, and Melissa S. Kea ney. 2008. T ends in U.S. Wage Inequali y: Re ising he Re isionis s. The Re iew
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104
Ci a ion: Da idescu, Ad iana
AnaMa ia, Tama a Ma ia Nae, and
Ma ga e a-S ela Flo escu. 2024. F om
Policy o Impac : Ad ancing
Economic De elopmen and Tackling
Social Inequi ies in Cen al and
Eas e n Eu ope. Economies 12: 28.
h ps://doi.o g/10.3390/
economies12020028
Academic Edi o : Fabio Clemen i
Recei ed: 5 Decembe 2023
Re ised: 17 Janua y 2024
Accep ed: 19 Janua y 2024
Published: 24 Janua y 2024
Copy igh : © 2024 by he au ho s.
Licensee MDPI, Basel, Swi ze land.
This a icle is an open access a icle
dis ibu ed unde he e ms and
condi ions o he C ea i e Commons
A ibu ion (CC BY) license (h ps://
c ea i ecommons.o g/licenses/by/
4.0/).
economies
A icle
F om Policy o Impac : Ad ancing Economic De elopmen and
Tackling Social Inequi ies in Cen al and Eas e n Eu ope
Ad iana AnaMa ia Da idescu 1,2,*, Tama a Ma ia Nae 3,4 and Ma ga e a-S ela Flo escu 5
1Depa men o S a is ics and Econome ics, The Bucha es Uni e si y o Economic S udies,
010552 Bucha es , Romania
2
Depa men o Educa ion, T aining and Labou Ma ke , Na ional Scien iﬁc Resea ch Ins i u e o Labou and
Social P o ec ion, 010643 Bucha es , Romania
3Depa men o Economics and Economic Policy, Bucha es Uni e si y o Economic S udies,
010552 Bucha es , Romania; [email p o ec ed]o
4Resea ch and Analysis Depa men , Minis y o Finance, 050706 Bucha es , Romania
5Depa men o Adminis a ion and Public Managemen , Bucha es Uni e si y o Economic S udies,
010374 Bucha es , Romania; ma ga e a.ﬂo [email p o ec ed]
*Co espondence: ad iana.alexand [email p o ec ed]
Abs ac :
This s udy challenges he adi ional eliance on GDP as he sole indica o o he success
o he EU’s cohesion policy, aligning wi h he e ol ing academic discou se ha calls o a b oade
spec um o me ics inco po a ing social ac o s. The esea ch aims o assess he impac o cohesion
on economic pe o mance and social p og ess a he egional le el in Cen al and Eas e n Eu opean
coun ies, using eg ession analysis on panel da a. Inspi ed by he call o mo e beyond GDP- ocused
assessmen s, his esea ch e-e alua es cohesion policy wi hin an expanded amewo k ha p io i izes
economic and social dimensions. Speciﬁcally, i add esses he escala ing conce ns o income dispa i y
and po e y in Cen al and Eas e n Eu opean na ions. U ilizing panel da a eg ession models, his
s udy sc u inizes da a om 2007 o 2018, co e ing wo ecen p og amming pe iods, o o e a
comp ehensi e, mul i ace ed analysis o he impac o cohesion policy. I unde sco es he policy’s
dual ole in spu ing economic g ow h and os e ing social p og ess, pa icula ly in mi iga ing income
inequali y and educing po e y. The ﬁndings e eal ha cohesion policies posi i ely a ec bo h
economic pe o mance and social p og ess, wi h no able impac s on na owing he income gap and
alle ia ing po e y in hese egions. Howe e , he economic beneﬁ s o po e y educ ion ma e ialize
o e a p olonged pe iod, eﬂec ing he g adual na u e o policy impac and he ime needed o
in es men s o ma e ialize. The s udy emphasizes he need o a long- e m s a egic ision in
implemen ing cohesion policies. This includes enhanced da a collec ion, a deepe ocus on he social
amiﬁca ions o policies, s eamlined policy p ocesses, capaci y building, ins i u ional s eng hening,
and p io i izing equi able oppo uni ies o b idge income gaps e ec i ely. This comp ehensi e
app oach aims o maximize he dual beneﬁ s o cohesion policies, p omo ing balanced economic and
social p og ess ac oss Cen al and Eas e n Eu ope.
Keywo ds:
cohesion policy; economic de elopmen ; social p og ess; egional analysis; beyond
he GDP
1. In oduc ion
The ﬁnal objec i e o he Eu opean Social Model is o simul aneously ensu e economic
g ow h and social cohesion. One o he cen al goals o he EU (Eu opean Union), s ipula ed
in he Maas ich T ea y, is p omo ing social and economic p og ess by s eng hening
economic and social cohesion. I is widely ecognized ha he p omo ion o cohesion is
one o he mos p ominen and impo an o he EU’s many poli ical esponsibili ies; his
impo ance is ounded on se e al aspec s, such as: (i) he ac ha i has acqui ed inc eased
impo ance o e ime wi h ega d o he budge a y expenses o he Eu opean Union;
Economies 2024,12, 28. h ps://doi.o g/10.3390/economies12020028 h ps://www.mdpi.com/jou nal/economies
105
Economies 2024,12,28
(ii) cohesion policy is qui e isible in i s b oad emi , co e ing a e y wide ange o EU
policy ac i i ies, including in as uc u e, elecommunica ions, esea ch and de elopmen ,
compe i i eness, oca ional aining, employmen and social inclusion, as well as objec i es
o p omo e en i onmen al sus ainabili y and digi iza ion—objec i es ha a e in line wi h
he pe spec i es o he g een and digi al ansi ion; (iii) he con ibu ion o he consolida ion
o he p ocess o his o ical enla gemen and he EU deepening; (i ) cohesion policy in ol es
a la ge numbe o poli ical ac o s a Eu opean le el, also managing o include go e nmen al
and non-go e nmen al decision-make s a egional and local le els.
Wi h he eme gence o he Eu ope 2020 S a egy, he objec i es o he cohesion policy
ha e acqui ed a mul idimensional cha ac e is ic, paying inc easing a en ion o social
objec i es. Thus, he analysis o be de eloped, as pa o quan i a i e esea ch, aims o
expand he assessmen o he cohesion policy on economic de elopmen by adding he
social dimension o iden i y he e ec s in e ms o achie ing he wo objec i es ha a e
complemen a y in he Eu opean model: economic g ow h and social cohesion.
This s udy explo es he hypo hesis ha cohesion policy posi i ely a ec s economic
g ow h and social ou comes. The esea ch p obes in o he impac o cohesion policy on
economic pe o mance and social p og ess by analyzing egional-le el da a om Cen al
and Eas e n Eu opean (CEE) coun ies du ing he 2007–2013 and 2014–2020 p og amming
pe iods using panel da a eg ession models. This choice s ems om he EU’s ﬁnancial
alloca ion s a egy based on egional GDP (g oss domes ic p oduc ) and he inc easing
ecogni ion o he social dimension in bo h EU and global s a egies, like he UN’s Sus ain-
able De elopmen Goals.
Cen al and Eas e n Eu opean coun ies exhibi di e se economic pe o mances and
social landscapes. Be o e he COVID-19 pandemic, many coun ies like Poland, Hunga y,
Czech Republic, Slo akia, and Romania expe ienced GDP g ow h a es be ween 3% and 5%
annually, eﬂec ing ela i e economic obus ness compa ed o Wes e n Eu ope. Howe e ,
a ying le els o unemploymen pe sis , wi h a es a ound 6.1% in Poland, 4.1% in Hunga y,
3.6% in he Czech Republic, 7.7% in Slo akia, and 4.3% in Romania as o 2021. Income
dispa i ies emain a challenge, pa icula ly be ween u al and u ban a eas, accen ua ing
economic inequali ies. While some coun ies ha e imp o ed heal hca e sys ems and social
wel a e, demog aphic shi s, including aging popula ions and he ou wa d mig a ion o
skilled wo ke s, pose ongoing conce ns. EU unding has aided in as uc u e de elopmen
and educa ion, and digi al ans o ma ion e o s a e unde way o bols e inno a ion and
compe i i eness. The COVID-19 pandemic has b ough a ied economic impac s o CEE
na ions. Some expe ienced signiﬁcan con ac ions due o lockdowns and dis up ions in
global supply chains, while o he s demons a ed esilience. These coun ies ace ongoing
challenges in managing income dispa i ies, unemploymen , and demog aphic shi s while
s i ing o mode nize in as uc u e, imp o e heal hca e, and enhance digi al capabili ies.
A deﬁning ea u e o he CEE na ions ha jus iﬁes g ouping hem o analysis, an-
icipa ing ela i ely consis en ou comes, is hei sha ed his o y as o me communis
s a es. These na ions unde wen challenging ansi ional phases, lea ing hem wi h a i-
ous economic, social, and ins i u ional ulne abili ies. Consequen ly, hei adminis a i e
capabili ies in secu ing ex e nal ﬁnancial suppo and hei me hods o u ilizing hese
unds ha e no achie ed he an icipa ed p og ess le els. The ERDF (Eu opean Regional
De elopmen Fund) s ands ou as one o he mos pi o al ools, championing goals like
economic expansion and employmen gene a ion and os e ing close e i o ial collab-
o a ion. Addi ionally, he ERDF lends suppo o egions acing inhe en demog aphic
o geog aphical challenges. This includes egions like hinly popula ed a eas o hose
domina ed by moun ainous e ains whe e homes a e widely dispe sed om he main
communi y. Fo he 2014–2020 p og amming du a ion, ou o he o al budge ea ma ked
o he cohesion policy (a ound EUR 350 billion), he ERDF was alloca ed EUR 199 billion,
ea ma ked o speciﬁc hema ic goals.
This s udy aims o ex end he assessmen o cohesion policy’s impac on economic
de elopmen by adding a social dimension, hus explo ing he dual objec i es o economic
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Economies 2024,12,28
g ow h and social cohesion, which a e complemen a y in he Eu opean model. Thus, he
s udy aims o espond o se e al ele an esea ch ques ions:
How does he EU’s cohesion policy impac economic g ow h and social ou comes in
Cen al and Eas e n Eu opean (CEE) coun ies? How e ec i e a e EU cohesion policies in
educing social inequi ies, speciﬁcally income dispa i y and po e y, in CEE egions?
Is he e a measu able co ela ion be ween he implemen a ion o EU cohesion policies
and imp o emen s in bo h economic pe o mance and social p og ess a he egional le el
in CEE coun ies? How does he ime-lagged na u e o cohesion policy’s impac inﬂuence
i s e ec i eness in achie ing economic and social objec i es?
Howe e , i should be no ed ha (which is cha ac e ized by an al e na ion o s a ing
and s opping he e o ming p ocesses) (Dinu e al. 2005), which is why one o he me hod-
ological di ﬁcul ies iden iﬁed a he le el o his analysis is ha he e ec s o cohesion policy
on economic pe o mance and social p og ess canno be obse ed immedia ely bu wi h de-
lays. The e o e, he e ec s o cohesion policy ake ime o become appa en as in es men s
a e sp ead o e se e al yea s, and some o hei esul s a e hen ein es ed, which delays
he expec ed e ec s. A he same ime, some egions a e mo e dynamic in economic ac i i y,
and o he s ha e a na owe concen a ion o ac i i y, which de e mines di e en hy hms
in e ms o he eme gence o esul s. Thus, he s uc u e and implemen a ion ules o he co-
hesion policy made i ulne able o c i icism (Ba ca 2009). Hence, he e is a need o iden i y
he e ﬁciency o ine ﬁciency o he cohesion policy as a con ibu ion o he discussions on i s
e o ma ion. Thus, in he amewo k o he analysis, models wi h a dynamic s uc u e we e
de eloped o cap u e he delays in he appea ance o he esul s. In enhancing he discou se,
his s udy pushes bounda ies beyond adi ional GDP- ocused e alua ions, ad oca ing
o mo e holis ic indica o s ha encapsula e social p og ess. This endea o augmen s he
academic dialogue and in o ms policy decisions o upcoming p og amming pe iods. A
e iew o he exis ing li e a u e sugges s a p essing need o explo e cohesion policy’s dual
impac on economic de elopmen and social p og ess. Mo ing beyond he adi ional
me ic o GDP g ow h, he e is a compelling case o inco po a ing b oade indica o s
ha o e a comp ehensi e insigh in o social dimensions. While GDP g ow h emains a
i al benchma k, i is no he sole aim o cohesion policy. E alua ing i s e ec s on di e se
socio-economic ma ke s deepens academic discou se and bols e s he unde pinnings o
policy decisions. Such a holis ic app oach could enhance he e ﬁciency o cohesion und
alloca ions in upcoming p og amming pe iods. Cohesion unds a e EU subsidies o he
de elopmen o he social and indus ial in as uc u e o ce ain membe na ions.
Inco po a ing social indica o s, such as he SPI (Social P og ess Index), in o he e alu-
a ion o cohesion policy is c ucial as i p o ides a mo e comp ehensi e unde s anding o
policy impac s; adi ional economic me ics like GDP a e limi ed in scope and ail o ully
cap u e he nuances o socie al ad ancemen , especially in he ealms o income inequali y
and po e y educ ion.
The Oppo uni ies pilla o he SPI, ocusing on aspec s like access o educa ion,
in o ma ion, and ad anced heal hca e, se es as a i al complemen o economic da a,
o e ing a deepe insigh in o how cohesion policies os e equi able oppo uni ies and
di ec ly con ibu e o mi iga ing social dispa i ies.
By in eg a ing obus social indica o s alongside economic me ics, we can gain a
mo e holis ic iew o cohesion policy ou comes, ensu ing ha assessmen s a e no jus
abou economic e ﬁciency bu also abou hei e ec i eness in c ea ing inclusi e, equi able
socie ies whe e oppo uni ies o ad ancemen and po e y educ ion a e ealis ically
app aised and add essed.
This s udy explo es he hypo hesis ha cohesion policy posi i ely a ec s economic
g ow h and social ou comes. I examines he impac o cohesion policy on economic
pe o mance and social p og ess a he egional le el in CEE coun ies du ing he 2007–2013
and 2014–2020 p og amming pe iods using panel da a eg ession models. This app oach is
oo ed in he EU’s ﬁnancial alloca ion s a egy based on egional GDP and acknowledges
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he inc easing ecogni ion o he social dimension in global s a egies, such as he UN’s
Sus ainable De elopmen Goals.
CEE coun ies p esen di e se economic pe o mances and social landscapes, wi h
a ious challenges and achie emen s in di e en sec o s. The COVID-19 pandemic has
u he complica ed hese scena ios, ha ing a ied economic impac s on he na ions. The
sha ed his o y o hese coun ies as o me communis s a es p o ides a common h ead
o analysis, an icipa ing ela i ely consis en ou comes ac oss he egion. F om his poin
o iew, he pape makes se e al con ibu ions o he li e a u e. Fi s ly, a holis ic e alua ion
o cohesion policy: While much o he exis ing li e a u e ocuses on he economic impac s
o he cohesion policy, p ima ily gauging success h ough GDP g ow h, his s udy p o ides
a mo e comp ehensi e assessmen ; by inco po a ing he social dimension, he esea ch
p esen s a mul idimensional pe spec i e on he policy’s ou comes. Secondly, an in-dep h
egional analysis o CEE coun ies: The s udy del es deep in o he speciﬁc con ex o hese
coun ies. Gi en ha he egions o CEE coun ies ha e adi ionally been unde ep esen ed
in simila esea ch, his wo k ﬁlls a signiﬁcan gap. Thi dly, dynamic models: ecognizing
he ime-lagged impac s o cohesion policies, he s udy employs dynamic models o accoun
o he delays in ou comes. This app oach ensu es a mo e accu a e depic ion o he policy’s
eal- ime and long- e m e ec s. Fou hly, he s udy acknowledges and alida es o he
signiﬁcan indica o s eﬂec ing social p og ess by en u ing beyond he con en ional GDP
me ic. This b oade app oach o e s a mo e ounded pic u e o he policy’s impac s and
unde sco es he need o a ied e alua ion me ics in he u u e. Fi hly, implica ions o
policy e o ma ion: highligh ing he cohesion policy’s e ﬁciency o ine ﬁciency con ibu es
aluable insigh s ha could shape discussions on policy e o ma ion. Six hly, b idging
li e a u e gaps: he esea ch akes a bold s ep in analyzing and challenging he exis ing
li e a u e. I add esses he dea h o s udies on he social impac o cohesion unds, u he
en iching academic discussions and o e ing esh a enues o u u e esea ch.
This pape con ibu es o he li e a u e by p o iding a holis ic e alua ion o cohesion
policy, del ing in o he speciﬁc con ex o CEE coun ies, employing dynamic models o
cap u e ime-lagged impac s, and ad oca ing o a b oade ange o e alua ion me ics. I
add esses he need o policy e o ma ion and aims o b idge li e a u e gaps by analyzing
he social impac o cohesion unds.
The pape un olds as ollows: Ini ially, we ou line ou co e objec i es and he a ionale
behind he impac analysis, g ounding ou esea ch wi hin he Eu opean landscape. Nex ,
we p o ide a li e a u e e iew, spo ligh ing he scan esea ch on he e ec i eness o
cohesion policy, pa icula ly in he con ex o CEE egions. In he subsequen sec ion,
we del e in o ou esea ch me hodology, de ailing he da a ans o ma ion p ocesses o
ensu e accu a e ou comes. Ou ﬁndings highligh he co ela ion be ween cohesion unds,
economic g ow h, and social p og ess indica o s. We hen e alua e he ecen e olu ion o
cohesion policy ools in CEE o e he pas wo p og amming pe iods. The pape concludes
wi h key akeaways and ac ionable ecommenda ions o enhancing he e ﬁcacy o cohesion
und alloca ion.
2. Li e a u e Re iew
O e ime, cohesion policy has p o en e ec i e in helping many s a es educe hei
egional gaps and gaps wi h o he Membe S a es. I subs an ially imp o ed he economies
o he s a es in he PIGS g oup (Po ugal, I eland, G eece and Spain), ha ing a GDP pe
inhabi an alue below 90% o he Eu opean Communi y a e age, hus being eligible o
he g an ing o cohesion unds and subsequen ly enjoying a subs an ial ca ching-up e ec .
Th ough i s ac ions, cohesion policy has signiﬁcan ly con ibu ed o accele a ing g ow h
and p ospe i y in he EU, educing ce ain economic, social and e i o ial dispa i ies.
In he las ew decades, Fiaschi e al. (2018) and simila s udies ha e p o ided aluable
insigh s in o he economic dimensions o cohesion policy. They p edominan ly cen e
on egional GDP, neglec ing a comp ehensi e analysis o c ucial social ou comes such
as employmen a es, po e y le els, and social inclusion measu es, he eby lea ing a
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no able gap in unde s anding he ull spec um o policy e ec s. The p e alen ocus on
economic indica o s in he exis ing li e a u e o e looks he mul i ace ed na u e o social
p og ess, ailing o adequa ely e alua e how cohesion policies inﬂuence mo e nuanced
social dimensions, including he e ec i eness o hese policies in di ec ly educing po e y,
enhancing job oppo uni ies, and os e ing inclusi e social en i onmen s. This o e sigh in
he li e a u e highligh s a c i ical need o expanded esea ch ha goes beyond economic
me ics, o e ing a mo e holis ic iew o cohesion policy impac s by inco po a ing assess-
men s o di ec social beneﬁ s, he eby p o iding a clea e pic u e o how hese policies
con ibu e o o all sho in add essing key socie al challenges like income inequali y and
social exclusion.
In addi ion o he me i s associa ed wi h cohesion policy, i has been subjec ed o a
se ies o c i icisms o e ime, such as: (i) ailu e o mee he objec i es es ablished by he
EU T ea ies, (ii) insu ﬁcien emphasis on economic g ow h (Sapi 2003), and (iii) u ned
in o a cap i a ing policy wi hou a clea mission, wi h complex and o e ly bu eauc a ic
adminis a ion (Manzella and Mendez 2009). La e , c i icism na owed down o he esul s,
wi h s udies iden i ying a posi i e impac on economic g ow h (C escenzi and Giua 2016;
Rod iguez-Pose and No ak 2013; Tomo a e al. 2013). In con as , o he s udies iden iﬁed a
nega i e impac (Dall’E ba and Le Gallo 2008) o no impac (Bold in and Cano a 2001),
and o he s sugges ed ha he e is no consensus ega ding he e ec i eness o cohesion
policy (Ede een e al. 2003; Da as and Wol 2018). The e a e di e gen conclusions abou
he e ec i eness o cohesion policy because he me hods and hypo he ical app oaches used
in de e mining he esul s a e ex emely di e en .
Analyses o he impac o cohesion policy on Eu opean egional pe o mance mainly
ocus on he economic dimension, measu ed by GDP pe capi a and occasionally by he
employmen a e (Becke e al. 2010; Rod íguez Pose and No ak 2013; Giua 2017; Fiaschi
e al. 2018; C escenzi and Giua 2020) o he le el o educa ion and heal h (Calega i e al.
2021). Al hough he e is a ich li e a u e base on he e ec s o cohesion, especially on
economic pe o mance, i is inconclusi e. Con as ing esul s de i e om he choice o
spa ial and empo al conside a ions, a iables used, and impac es ima ion me hodologies.
Fa ell (2004) iden iﬁes a posi i e impac o s uc u al unds on egional economic
g ow h in I eland and Spain. The esul s a e suppo ed by Lolos (2009), who analyzes
he case o G eece. Some s udies iden i y a posi i e impac on economic g ow h, wi h
mo e p onounced e ec s o de eloped egions (C escenzi and Giua 2016; Calega i 2020).
The possible explana ions o hese esul s a e, on he one hand, ha he egions behind
ha e less nego ia ion skills o a ac mo e unds (Cha on 2016; F a esi and Wishlade
2017), and on he o he hand, ha hese egions p esen a educed capaci y o abso b he
alloca ed unds, which leads o he pa adoxical si ua ion whe e he egions en i led o
ecei e conside able amoun s om he s uc u al unds canno use hem (Becke e al. 2013;
Su uba u 2017; Ce qua and Pelleg ini 2018).
Also, some s udies ha e no iden iﬁed any e ec o cohesion policy on economic
g ow h pe o mance (Ede een e al. 2006), which does no iden i y “conclusi e ag eemen s
on he impac o EU cohesion policy in he exis ing li e a u e” Medei os (2014). O he
s udies sugges ha signiﬁcan anspo and in as uc u e in es men s suppo ed by
cohesion policy do no a ec economic g ow h (C escenzi and Rod íguez-Pose 2012). Some
conclude ha he e is no signiﬁcan impac o he abso p ion a e o EU unds on g ow h
in he EU coun ies in he sho e m. Howe e , e en a nega i e impac can be iden iﬁed
(Albulescu and Goyeau 2013). O he s udies iden i y a nega i e impac , such as Dall’E ba
and Le Gallo (2008), who e alua ed he impac o s uc u al unds on he con e gence
p ocess be ween 145 Eu opean egions om 1989 o 1999. They iden iﬁed he con e gence
p ocess, bu he unds did no impac i . Al hough s udies on he impac o cohesion unds
ha e ocused on he e ec s exe ed on economic g ow h, wi h a limi ed con ibu ion o
he li e a u e ega ding he inﬂuence on o he indica o s ha eﬂec he social dimension,
ecen ly, an inc easingly signiﬁcan wa e o esea ch explo es he e ec o cohesion policy
on o he ypes o non-economic ou comes as well (Fe a a e al. 2022; Albanese e al. 2021).
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Economies 2024,12,28
Fo example, Calega i e al. (2021) goes beyond GDP and analyzes he impac o
cohesion policy on GDP pe capi a and socie al well-being h ough a modiﬁed e sion o
he adap ed human de elopmen index. The esul s o he s udy indica e ha cohesion
policy has signiﬁcan ly inc eased o e all well-being in low-pe o ming egions ha ha e
used cohesion unds, wi h he esul s being pa icula ly isible in imp o ing he le el o
educa ion. A emp s o o e come he GDP ba ie we e also app oached by C escenzi and
Giua (2018), who ound ha he cohesion policy exe ed a posi i e and signiﬁcan impac
a he EU le el bo h on egional economic g ow h and on employmen , sugges ing ha he
posi i e e ec on egional employmen su i ed he G ea Dep ession and suppo ed less
de eloped egions du ing he eco e y.
Mauco ps e al. (2020) analyzed he e ec s o EU cohesion policy on he economic
g ow h o 276 Eu opean NUTS-2 egions be ween 2008 and 2016, using a s uc u al equa ion
model consis ing o a measu emen componen (wi h wo la en a iables) and a s uc u al
componen . The s udy’s esul s suppo he exis ence and pu pose o cohesion policy,
whe e EU unding is essen ial o he economic de elopmen o Eu opean egions wi hou
o he abundan sou ces o unding, ocusing on mi iga ing s uc u al deﬁciencies ha
p e en he e ec i e use o con e gence in es men s.
I is well known in he li e a u e (Acemoglu and Robinson 2012) ha economic g ow h,
o en s imula ed by e ec i e cohesion policies, lays he ounda ion o social p og ess, as
inc eased egional p ospe i y can lead o enhanced public se ices, be e in as uc u e, and
imp o ed li ing s anda ds, all o which a e c ucial o comp ehensi e social de elopmen .
While economic ad ancemen s unde cohesion policy ha e he po en ial o yield signiﬁcan
social beneﬁ s, such as educed po e y a es and g ea e income equali y, he e emains
a conspicuous gap in he cu en esea ch ha explici ly links hese economic gains o
angible imp o emen s in hese speciﬁc social condi ions (S igli z e al. 2010).
Acco ding o Pike y (2014), he assump ion ha economic g ow h au oma ically ans-
la es in o social p og ess is o e ly simplis ic; wi hou delibe a e measu es and a ge ed
policies, he beneﬁ s o inc eased egional GDP may no e ec i ely ickle down o add ess
co e issues o po e y and income dispa i y. To uly unde s and he impac o cohesion
policy, esea ch mus ex end beyond economic indica o s and igo ously examine how
hese economic imp o emen s co ela e wi h, and possibly con ibu e o, key social ou -
comes like enhanced employmen oppo uni ies, po e y alle ia ion, and na owed income
gaps (Sen 1999).
This lack o explici linkage in he cu en li e a u e be ween economic g ow h and
i s po en ial social beneﬁ s unde sco es he need o a mo e in eg a ed app oach o policy
e alua ion—one ha conside s how economic ad ancemen s unde cohesion policies a e
p ac ically eﬂec ed in he daily li es o indi iduals, pa icula ly hose in economically
disad an aged segmen s (Sachs 2015).
While he li e a u e has es ablished he economic e ec i eness o cohesion policy,
pa icula ly o he PIGS coun ies, he e is a disce nible need o del e in o he social
impac s o such policies. The cu en esea ch co pus, which p edominan ly cen e s on GDP
g ow h, does no su ﬁcien ly add ess he b oade social dimensions such as employmen ,
po e y alle ia ion, and social inclusion, lea ing a gap ou esea ch aims o ﬁll. We p opose
a dual- ocused analysis conside ing economic and social indica o s o p o ide a mo e
nuanced unde s anding o cohesion policy ou comes. The con as ing conclusions d awn
om exis ing s udies on he economic impac o cohesion policy, anging om posi i e
o non-signiﬁcan e ec s, sugges a me hodological di e gence ha ou s udy seeks o
econcile. By employing a obus , in eg a i e me hodology, we aim o o e cla i y o he
deba e and con ibu e a comp ehensi e pe spec i e on he e ec i eness o cohesion policy
in bo h economic and social e ms.
Fu he mo e, while some esea ch poin s o he beneﬁ s o cohesion policy on egional
de elopmen and g ow h, he social implica ions o such policies a e no as well docu-
men ed. Ou s udy ex ends he scope o analysis beyond GDP, inco po a ing b oade
indica o s o socie al well-being, such as he modiﬁed HDI (Human De elopmen Index),
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Economies 2024,12,28
as examined by Calega i e al. (2021), and employmen , as highligh ed by C escenzi and
Giua (2018).
We acknowledge he li e a u e’s call o an in eg a ed e alua ion app oach ha acks
economic p og ess unde cohesion policy and c i ically examines how such ad ancemen s
ansla e in o social beneﬁ s. By doing so, we aim o b idge he gap iden iﬁed by seminal
hinke s like S igli z e al. (2010) and Pike y (2014) and p o ide a mo e holis ic assessmen
o cohesion policy’s impac on imp o ing li ing s anda ds and educing social dispa i ies.
In essence, ou esea ch add esses he lacuna in he exis ing li e a u e by explo ing he
di ec linkage be ween economic g ow h acili a ed by cohesion policy and i s angible social
beneﬁ s, o e ing new insigh s in o how inc eased egional p ospe i y unde such policies
can lead o subs an ial social imp o emen s, pa icula ly o hose in less ad an aged
economic b acke s.
To con ex ualize ou s udy wi hin he b oade academic dialogue and o illus a e he
con ibu ion his esea ch makes o exis ing schola ship, Table 1 below p esen s a cu a ed
o e iew o majo p e ious s udies ela ed o he impac o cohesion policy on economic
g ow h and social ou comes.
Table 1. An o e iew o he mos ele an s udies in he li e a u e.
Au ho s Ti le Jou nal Yea
F a esi, Ugo, and Fiona G. Wishlade The Impac o Eu opean Cohesion Policy in
Di e en Con ex s Regional S udies 2017
Gaglia di, Luisa, and Ma co Pe coco The Impac o Eu opean Cohesion Policy in
U ban and Ru al Regions Regional S udies 2017
C escenzi, Ricca do, and Ma a Giua
One o Many Cohesion Policies o he
Eu opean Union? On he Di e en ial
Economic Impac s o Cohesion Policy ac oss
Membe S a es
Regional S udies 2020
B adley, John
E alua ing he Impac o Eu opean Union
Cohesion Policy in Less-De eloped
Coun ies and Regions
Regional S udies 2006
Pî u, Ramona, e al.
The Impac o he Implemen a ion o
Cohesion Policy on he Sus ainable
De elopmen o EU Coun ies
Sus ainabili y 2019
The exis ing li e a u e on cohesion policy in he EU has p edominan ly concen a ed
on economic indica o s, such as egional GDP, neglec ing c ucial social dimensions like
employmen a es, po e y le els, and social inclusion. To add ess his gap, ou p oposed
esea ch akes a dual- ocused app oach, simul aneously conside ing economic and social
indica o s. In doing so, we aim o o e a mo e comp ehensi e and holis ic unde s anding
o he ou comes o cohesion policy. Addi ionally, he e is a ecognized me hodological
di e gence in exis ing s udies ega ding he economic impac o cohesion policy. Ou
esea ch con ibu es by p oposing he use o a obus , in eg a i e me hodology o econcile
hese di e ences, p o iding a comp ehensi e pe spec i e on he e ec i eness o cohesion
policy in bo h economic and social e ms. This app oach aims o b idge he gap in he
li e a u e and enhance he unde s anding o he mul i ace ed impac s o cohesion policies
in he Eu opean Union.
3. Da a and Me hodology
This esea ch aims o assess he impac o cohesion on economic pe o mance and
social p og ess a he egional le el in CEE coun ies using eg ession analysis on panel
da a. The s udy ocuses on 54 egions o 10 CEE coun ies (Bulga ia, Czech, Es onia, La ia,
Li huania, Hunga y, Poland, Romania, Slo akia and Slo enia), o he pe iod 2007–2018—
his pe iod was chosen acco ding o he las wo p og amming pe iods o he Mul iannual
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The EQI, as delinea ed by he Eu opean Commission, eﬂec s ci izens’ collec i e pe -
cep ions and encoun e s conce ning co up ion and he quali y and ai ness o pi o al
public se ices—namely heal h, educa ion, and law en o cemen —wi hin hei esiding
egions. This index is cons uc ed om he mos expansi e su ey e e conduc ed o gauge
he quali y pe cep ion o go e nance wi hin he EU. This monumen al su ey amassed
insigh s and ﬁ s hand expe iences in public heal h, educa ion, and law en o cemen om
o e 129,000 pa icipan s ac oss 208 egions spanning all 27 EU Membe S a es, assessed
a ei he he NUTS1 o NUTS2 le el. The su ey’s inqui ies a e oo ed in a comp ehen-
si e, mul i ace ed unde s anding o go e nmen quali y, encompassing high s anda ds o
impa iali y and public se ice deli e y pai ed wi h minimal co up ion.
Figu e 4 p o ides an o e iew o he quali y o public se ices in he EU egions, high-
ligh ing a seg ega ion be ween Sou h-Eas and No h-Wes Eu ope ha can be associa ed
wi h he le el o de elopmen o he egions as he Sou h-Eas a ea is cha ac e ized by
ansi ion coun ies ha a e less de eloped. In con as , he No h-Wes a ea ep esen s
he ha d co e o he EU. The EQI le el is o conside able impo ance in he con ex o
he abso p ion and use o Eu opean unds, as a lowe alue o go e nmen quali y can
unde mine he e ﬁciency o he use o ﬁnancial esou ces o e en gene a e a de ia ion
om he cohesion objec i e. The lowe EQI alues obse ed in he Sou heas e n egions,
associa ed wi h ansi ion coun ies, a e suppo ed by a ious s udies, including hose
by Acemoglu and Robinson (2012), who emphasize he impac o go e nance quali y on
economic ou comes. Addi ionally, wo ks by Zaman and Geo gescu (2009), C escenzi and
Giua (2016), and Calega i (2020) ein o ce he idea ha go e nmen quali y is ins umen al
in de e mining he success o egional de elopmen policies.
Figu e 4. Eu opean Go e nmen Quali y Index (EQI 2017).
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Fu he mo e, he discussion su ounding he seg ega ion be ween Sou h-Eas and
No h-Wes Eu ope is oo ed in he his o ical con ex o EU expansion, wi h he Sou heas -
e n egions o en acing challenges in ca ching up wi h hei mo e de eloped coun e pa s.
Empi ical da a om a ious s udies, such as hose by Rod íguez-Pose and Ha dy (2015)
and Becke e al. (2013), suppo he no ion ha he dispa i ies in go e nmen quali y
con ibu e o a ia ions in he abso p ion and e ec i e u iliza ion o Eu opean unds.
The u u e di ec ion o he cohesion policy in 2021–2027 will ocus mainly on he g een
and digi al ansi ion. The 2021–2027 mul iannual ﬁnancial amewo k was gea ed owa ds
apid eco e y and esilience, s eng hening con e gence be ween EU egions, gi en he
une en e i o ial impac o he c isis. In his con ex , he legisla i e package on cohesion
policy o he 2021–2027 p og amming pe iod en e ed in o o ce on July 1, 2021. The newly
e o med ules we e designed o inc ease he ocus o cohesion policy on a “sma e ” and
“g eene ” Eu ope and o c ea e a o able condi ions o in es men wi h simpliﬁed deli e y
mechanisms and close links o s uc u al e o ms. Cohesion policy will hus con ibu e
o implemen ing he EU poli ical agenda, pa icula ly p omo ing he g een ansi ion and
digi al ans o ma ion. The EU has commi ed o becoming he wo ld’s ﬁ s clima e-neu al
bloc by 2050. A Jus T ansi ion Fund has been se up unde cohesion policy o ensu e ha
he ansi ion o a clima e-neu al economy equi ably akes place, lea ing no egion behind.
4.2. E alua ion o he Impac o Cohesion Policy Ins umen s on he Economic and Social
Pe o mance o CEE Coun ies
Di e en speciﬁca ions ha e been es ed in e ms o componen s and o al alue o
assess he impac o cohesion policy on economic g ow h and social p og ess. In e e y
one o he en models e alua ed, we employed he Hausman es o de e mine he na u e
o he e ec s (be i ﬁxed o andom). The ou comes consis en ly poin ed o he exis ence
o andom e ec s ac oss all models. Addi ionally, e en hough he models we e deemed
alid, adjus men s we e made o accoun o he e oscedas ici y.
In he case o economic g ow h, he empi ical esul s highligh ed in all ou analyzed
models he posi i e and signiﬁcan impac o he in es men s o he unds speciﬁc o he
cohesion policy (ERDF, CF and ESF) on economic g ow h, bo h in e ms o componen s
and in o al alue (Appendix B, Table A2).
Thus, i we e e o he o al in es men o cohesion policy unds pe inhabi an ,
an inc ease in his indica o by 1% leads o an inc ease in economic pe o mance, ce e is
pa ibus, by 0.05%. CF in es men s ha e he mos p onounced impac in e ms o in es men
ype, hey lead o an inc ease in economic pe o mance, ce e is pa ibus, by 0.04%.
The posi i e coe ﬁcien s associa ed wi h he speciﬁc unds highligh he impo ance
o Eu opean unds in d i ing egional economic g ow h. This implies ha he s a egic
alloca ion o hese unds can os e posi i e economic ou comes o egions ha ecei e
hem. Each und had a dis inc impac on economic g ow h, as e idenced by he a ying
coe ﬁcien s ac oss models. This sugges s ha while all unds con ibu e posi i ely, hey
ha e di e en a eas o ocus o e ec i eness. While he ERDF p ima ily ocuses on eco-
nomic and social cohesion by co ec ing egional imbalances, he CF a ge s en i onmen al
and ans-Eu opean anspo in as uc u e in coun ies wi h a lowe GDP.
Gi en ha speciﬁc unds like he ERDF suppo egions wi h na u al handicaps o
hose ha a e demog aphically disad an aged, he posi i e impac on eal GDP pe capi a
unde sco es he impo ance o such unds in b idging egional dispa i ies and ensu ing
mo e equi able g ow h ac oss egions.
The posi i e impac o hese unds on GDP pe capi a migh ein o ce he need o
policymake s o con inue p io i izing hem. Mo eo e , unde s anding which unds ha e
he mos signiﬁcan impac can guide u u e budge a y alloca ions. While he unds
ha e a posi i e impac , he magni ude o he impac depends on how e ﬁcien ly hese
unds a e u ilized. E ﬁcien p ojec implemen a ion and und u iliza ion can maximize he
economic beneﬁ s.
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In essence, he obse ed posi i e impac s o speciﬁc Eu opean unds on eal GDP
pe capi a s ess he pi o al ole hese unds play in egional economic de elopmen . I
emphasizes he need o con inued in es men , e ec i e u iliza ion, and s a egic alloca ion
o maximize he desi ed economic ou comes.
The ini ial GDP pe capi a ( om he p e ious pe iod) has a posi i e and s a is ically
signiﬁcan impac on he cu en eal GDP pe capi a. A 1% inc ease in he ini ial GDP pe
capi a leads o inc eases in he cu en eal GDP pe capi a, anging om 0.34% o 0.4%
ac oss models. This sugges s ha egions wi h a highe ini ial GDP main ain economic
s eng h o e ime.
The EQI has a consis en ly posi i e and s a is ically signiﬁcan e ec on he Real
GDP pe capi a ac oss all models. The inﬂuence o EQI anges om 0.13% o 0.18% o a
uni inc ease, highligh ing he impo ance o go e nance quali y in posi i ely inﬂuencing
economic pe o mance. Highe alues o he EQI, indica ing be e go e nance and public
se ice deli e y, a e associa ed wi h highe eal GDP pe capi a.
In summa y, as measu ed by he EQI, good go e nance quali y and in es men s
om a ious Eu opean unds, especially when ini ia ed in he p e ious pe iod, ha e a
posi i e and signiﬁcan impac on he economic pe o mance o egions. This highligh s
he impo ance o e ec i e go e nance and s a egic in es men in economic g ow h.
In e ms o cap u ing he impac o he ESIF (Eu opean S uc u al and In es men
Fund) in es men s on social p og ess, he empi ical esul s e ealed a posi i e and s a-
is ically signiﬁcan impac ha was p ese ed in all ou models (bo h in o al and by
componen s o ESIF in es men s). The g ea es impac on social p og ess was mani es ed
by CF in es men , ce e is pa ibus. The esul s indica e ha he in es men s made by he
ESIF posi i ely inﬂuence social p og ess in he egions. This means ha as he unding
om he ESIF inc eases o is e ﬁcien ly u ilized, he e is a consequen imp o emen in
social indica o s like educa ion, heal h, equali y, and o e all well-being. The s a emen
emphasizes ha his posi i e e ec is consis en ac oss all ou models hey analyzed.
Whe he looking a he o al in es men s o b eaking hem down in o speciﬁc componen s,
he posi i e ela ionship holds. This consis ency ein o ces he eliabili y o he ﬁndings.
Among he ESIF componen s, he CF has he mos p onounced posi i e e ec on social
p og ess. This migh be because he CF speciﬁcally a ge s a eas like en i onmen al p ojec s
and ans-Eu opean anspo ne wo ks, which can ha e di ec o ickle-down e ec s on
he populace’s well-being.
Also, he ini ial alue o eal GDP/capi a and he EQI alue showed he same posi i e
and s a is ically signiﬁcan impac . So, he egions ha egis e ed a good economic s a
and beneﬁ ed om high-quali y ins i u ions achie ed inc eased social p og ess.
Regions ha began he pe iod wi h a highe GDP pe capi a (a gene al measu e o
economic well-being) also saw g ea e social p og ess. This sugges s a posi i e eedback
loop whe e egions wi h a good economic base can be e le e age ESIF in es men s o
u he social ad ancemen .
The quali y o ins i u ions, as measu ed by he EQI, also played a signiﬁcan ole.
Regions wi h be e go e nance, lowe co up ion, and highe quali y public se ices
(like heal h, educa ion, and law en o cemen ) we e mo e success ul in ansla ing ESIF
in es men s in o social p og ess. Good go e nance can ensu e he e ﬁcien and e ec i e
use o unds, leading o angible imp o emen s in he li es o he ci izens.
The ﬁndings unde sco e he impo ance o ﬁnancial in es men s om unds like he
ESIF and ounda ional ac o s like ini ial economic condi ions and ins i u ional quali y in
d i ing egional social p og ess.
This esea ch conduc ed a ho ough obus ness assessmen , u he p obing he e ec s
o ESIF in es men s on he a ious ace s o he social p og ess indica o (as seen in Table A3,
Appendix C). The empi ical esul s demons a ing a posi i e and signiﬁcan inﬂuence on
Basic Human Needs and Fundamen al Well-being unde sco e he e ec i eness o cohesion
policies in enhancing aspec s such as heal hca e, educa ion, and en i onmen al quali y,
which a e essen ial o he ounda ional wel a e o indi iduals in CEE na ions. Also,
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his posi i e impac eﬂec s he di ec beneﬁ s indi iduals in CEE egions expe ience in
hei daily li es, such as be e access o basic se ices and imp o ed li ing condi ions,
alida ing he a ge ed app oach o cohesion policies owa ds add essing undamen al
human necessi ies.
Howe e , he lack o a signiﬁcan impac on he Oppo uni ies segmen o he SPI,
pa icula ly in a eas ela ed o access o highe educa ion and in o ma ion echnology,
poin s o a po en ial disconnec be ween he economic g ow h acili a ed by cohesion
policies and he ansla ion o his g ow h in o eal oppo uni ies o indi iduals, especially
in e ms o ad ancing equi y and educing income dispa i ies.
The consis en ly lowe sco ing o CEE na ions in he SPI’s Oppo uni ies dimension
highligh s a c i ical a ea o policy imp o emen , sugges ing ha while basic needs and
well-being a e being add essed, he policies a e less e ec i e in c ea ing en i onmen s
whe e indi iduals can capi alize on economic g ow h o imp o e hei pe sonal and p o-
essional p ospec s. This gap in policy impac , especially in he ealm o educing income
inequali y and ackling po e y, calls o a e-e alua ion o he cu en policy amewo ks
and s a egies, emphasizing he need o no only os e economic g ow h bu o also en-
su e ha such g ow h ansla es in o equi able oppo uni ies and angible beneﬁ s o all
segmen s o socie y, pa icula ly he mos ulne able.
This obse a ion echoes A kinson’s asse ion (A kinson 2015) ha dispa i ies in ou -
comes obse ed oday pa e he way o unequal oppo uni ies in he u u e. This concep
is pa icula ly ele an in he con ex o income inequali y and po e y. When cu en
dispa i ies in income and weal h a e no add essed, hey pe pe ua e a cycle o po e y
and limi oppo uni ies o upwa d social mobili y o u u e gene a ions. The e o e, he
ocus on enhancing in e en ions in he Oppo uni ies sec o o he SPI is c ucial. By
ac i ely educing income dispa i ies and imp o ing access o educa ion, echnology, and
ai employmen , we can c ea e a mo e equi able ounda ion ha suppo s he well-being
and socio-economic ad ancemen o upcoming gene a ions. This app oach is no jus abou
educing p esen inequali ies; i is a s a egic in es men in p e en ing he en enchmen
o po e y and ensu ing ai e , mo e equi able oppo uni ies o all, he eby b eaking he
cycle o po e y and income inequali y ha can o he wise pe sis ac oss gene a ions.
5. Discussions and Policy Implica ions
While e alua ing he e ec s o cohesion policy is complex due o i s mul idimensional
na u e, a ge ing bo h economic and social goals, i is c ucial o no e ha hese a ied
in e en ions ha e his o ically emphasized economic de elopmen o e di ec social im-
pac s, pa icula ly in add essing income inequali y and po e y. The challenge lies in
dis inguishing he nuanced e ec s on social ou comes, such as educing income dispa i ies
and enhancing social wel a e, o en o e shadowed by he p ima y ocus on economic
indica o s like GDP.
The academic discou se, including wo ks by (Zaman and Geo gescu 2009; An onescu
2012; C escenzi and Giua 2016; Calega i 2020; Mauco ps e al. 2020), p edominan ly exam-
ines he economic impac s o EU cohesion policy. Howe e , his ocus lea es an empi ical
gap ega ding he policy’s e ec i eness in comba ing social issues like po e y and in-
equali y. While some s udies (Pinho e al. 2015; C escenzi and Giua 2016; Ce qua and
Pelleg ini 2018; Fid muc e al. 2019; Di Ca o and F a esi 2022) sugges a posi i e economic
impac , he di ec co ela ion wi h social imp o emen s, pa icula ly in educing po e y
and na owing income gaps, emains unde explo ed (Dall’E ba and Fang 2017; Eh lich and
O e man 2020).
Ou s udy’s alignmen wi h he li e a u e, such as Fa ell (2004) and Lolos (2009),
conﬁ ming posi i e economic impac s, also highligh s a need o deepen he unde s anding
o how hese economic beneﬁ s ansla e in o angible social p og ess. While economic
de elopmen is a posi i e ou come, i s success should also be measu ed by i s abili y o
alle ia e po e y and imp o e income equali y. As wi h he s udy by Mauco ps e al. (2020),
ou esul s, which ook in o accoun he impac o he h ee unds speciﬁc o he cohesion
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policy on economic de elopmen eﬂec ed h ough GDP pe capi a a he egional le el
(NUTS2) (elemen s ha we e aken in o accoun in bo h s udies), iden i y a posi i e impac .
Rega ding he impac o cohesion policy on social p og ess, ou s udy iden iﬁed a
posi i e impac on he agg ega e SPI and he wo pilla s o he SPI (Basic Human Needs
and Basic Well-being). S ill, o he coun ies conside ed (CEE), an impac on he Oppo u-
ni ies pilla was no iden iﬁed. This gap is pa icula ly c i ical when conside ing income
inequali y and po e y, as he Oppo uni ies pilla di ec ly ela es o aspec s like access o
highe educa ion and pe sonal igh s, which a e key in b eaking he cycle o po e y and
ensu ing equi able g ow h.
I is di ﬁcul o compa e he esul s wi h o he s udies as he li e a u e ela ing o he
impac on he SPI is limi ed. Howe e , some s udies ha e conside ed some o he a iables
included in he SPI. Mos o he li e a u e ela ed o he impac o Eu opean unds on he
employmen a e (Becke e al. 2010; Rod íguez Pose and No ak 2013; Giua 2017; Fiaschi
e al. 2018; C escenzi and Giua 2018; C escenzi and Giua 2020) p edominan ly iden i y a
posi i e impac , conside ing ha Eu opean unds con ibu e o inc easing he employmen
a e. O he social aspec s ha he esea che s ocused on we e he le el o educa ion and
he modiﬁed e sion o he adap ed human de elopmen index (Calega i 2020), whe e a
posi i e impac was also iden iﬁed.
The e o e, he consis en posi i e impac associa ed wi h cohesion policy on economic
g ow h emphasizes he c ucial ole o his policy in os e ing egional de elopmen . Bo h
economic g ow h and social p og ess ha e beneﬁ ed om he unds, implying ha well-
s uc u ed policy in e en ions can p oduce posi i e ou comes in hese a eas.
Rega ding he impac on economic g ow h and social ou comes, his s udy conﬁ ms
a posi i e co ela ion be ween he EU’s cohesion policy and economic g ow h in CEE
coun ies, aligning wi h he exis ing li e a u e, such as Fa ell (2004) and Lolos (2009).
Howe e , when i comes o he policy’s impac on social ou comes, pa icula ly in educing
po e y and income dispa i y, he ﬁndings e eal a mo e complex scena io. While he e
is a posi i e impac on he agg ega e Social P og ess Index (SPI) and i s componen s o
Basic Human Needs and Well-being, he gap in he Oppo uni ies pilla sugges s ha he
policy’s e ec i eness in add essing deepe social inequi ies needs mo e ocus.
In e ms o he co ela ion be ween policy implemen a ion and egional imp o emen s,
he empi ical esul s indica e ha egions wi h a s onge economic ounda ion (highe ini-
ial GDP pe capi a) end o le e age he beneﬁ s o cohesion unds mo e e ec i ely, he eby
ampli ying hei economic and social gains. This ﬁnding unde sco es he need o quali y
go e nance and e ﬁcien ins i u ions, which a e essen ial o op imizing und u iliza ion.
Conce ning he ime-lagged na u e o policy impac , his s udy sugges s ha he im-
pac o cohesion policy on social p og ess, especially in e ms o imp o ing pe sonal igh s
and access o highe educa ion, is no immedia e bu e ol es o e ime. This highligh s he
need o a long- e m s a egic ision in policy implemen a ion and assessmen .
The CF signi ican ly impac s economic pe o mance among he unds examined. This
unde sco es he CF’s pi o al ole in add essing dispa i ies and p omo ing con e gence among
EU egions, especially in en i onmen al p ojec s and ans-Eu opean anspo ne wo ks.
Regions wi h a good economic s a (highe ini ial GDP pe capi a) end o main ain
and ampli y hei economic s eng hs. Fu he , he consis en posi i e impac o he EQI
unde sco es he impo ance o quali y go e nance in d i ing economic ou comes. E ﬁcien
ins i u ions ha main ain low co up ion le els and p o ide high-quali y public se ices
pa e he way o he be e u iliza ion o unds and s onge economic g ow h.
The esul s indica e ha egions e ec i ely u ilizing ESIF in es men s wi ness ma ked
social p og ess. A holis ic app oach, combining ﬁnancial in es men s om unds like ESIF
wi h a solid ini ial economic base and high ins i u ional quali y, can ca alyze subs an ial
social ad ancemen s.
The esea ch ﬁndings ca y subs an ial signiﬁcance o shaping he ajec o ies o
social and economic p og ess in CEE economies. By conﬁ ming he consis en posi i e
impac o EU cohesion policy on economic g ow h in he egion, his s udy unde sco es
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he pi o al ole o a ge ed in e en ions and con inued suppo in os e ing egional
de elopmen . This insigh is pa icula ly c ucial o policymake s as i p o ides e idence
o he e ec i eness o cohesion policy in na owing economic dispa i ies and p omo ing
o e all economic ad ancemen in CEE coun ies.
The esea ch shows a gap in he Oppo uni ies segmen o he social p og ess indi-
ca o o CEE coun ies. This sugges s a need o a ge ed in e en ions in hese egions,
pa icula ly ocusing on pe sonal igh s, elec o al choices, ole ance, and access o highe
educa ion. As emphasized by A kinson’s obse a ion (A kinson 2015), add essing oday’s
inequali ies is c ucial o ensu ing equal oppo uni ies o u u e gene a ions.
Taking in o accoun he esul s o he s udy, we conside i impo an ha , o CEE
coun ies and egions, he ollowing aspec s a e aken in o accoun in he managemen o
he cohesion policy:
•
Inc ease Abso p ion o Eu opean Funds o Economic and Social Wel a e: This e-
sea ch emphasizes he need o g ea e e o s o inc ease he abso p ion deg ee o
Eu opean unds. This ecommenda ion aligns wi h he ﬁndings ha egions e ec-
i ely u ilizing ESIF alloca ions wi ness ma ked social p og ess. The sugges ion o
augmen abso p ion aims o le e age hese unds mo e e ec i ely o con ibu e o
bo h economic de elopmen and social wel a e.
•
Enhance Ins i u ional Quali y and T anspa ency: The s udy acknowledges he posi i e
impac o e ﬁcien ins i u ions on economic ou comes. The e o e, he ecommenda ion
o ocus on measu es and e o ms o enhance ins i u ional quali y aligns wi h he
esea ch ﬁndings. I emphasizes he impo ance o quali y go e nance in d i ing
economic g ow h and ensu ing be e u iliza ion o unds.
•
S eamline Bu eauc a ic P ocedu es: The sugges ion o s eamline public adminis a-
ion p ocesses and educe bu eauc a ic ba ie s esona es wi h he esea ch ﬁndings
calling o de-bu eauc a iza ion. Simpli ying access o Eu opean unds can acili a e
hei e ﬁcien u iliza ion, which, as he esea ch indica es, con ibu es o egional
economic and social p og ess.
•
Concen a e In es men s in Social A eas wi h Poo In as uc u e: The esea ch high-
ligh s a gap in he Oppo uni ies segmen o he SPI o CEE coun ies, pa icula ly
in a eas like access o highe educa ion and pe sonal igh s. The ecommenda ion
o concen a e in es men s in social a eas wi h poo in as uc u e aligns wi h his
ﬁnding, aiming o educe egional economic and social disc epancies and ul ima ely
p omo e inc eased cohesion.
•
Ta ge ed In e en ions o Add ess Inequali ies: The esea ch unde sco es he need o
a ge ed in e en ions in speciﬁc aspec s such as pe sonal igh s, ole ance, and access
o highe educa ion. The policy ecommenda ion ad oca ing o a mo e nuanced
app oach o cohesion policy in CEE coun ies aligns wi h he ﬁndings, emphasizing
he necessi y o a ge ed in e en ions o di ec ly add ess social dispa i ies and ensu e
equal oppo uni ies.
Gi en hese ﬁndings, ou esea ch ad oca es o a mo e nuanced app oach o cohe-
sion policy in CEE coun ies, emphasizing he need o a ge ed in e en ions ha boos
economic de elopmen and di ec ly add ess social dispa i ies. This includes imp o ing
ins i u ional quali y and anspa ency, educing bu eauc a ic ba ie s o und access, and
p io i izing in es men s in social in as uc u e. Such a comp ehensi e s a egy is essen ial
o b idging economic and social gaps, leading o a mo e cohesi e socie y whe e economic
g ow h ansla es in o educed po e y and g ea e income equali y.
6. Gene al Conclusions
The empi ical analysis suppo s he no ion ha well-s uc u ed EU cohesion policy
in e en ions can p oduce posi i e ou comes in bo h economic and social domains. The
signiﬁcan impac o unds like he Eu opean Regional De elopmen Fund (ERDF) on
egional economic pe o mance poin s o hei c ucial ole in p omo ing con e gence and
add essing dispa i ies, pa icula ly in en i onmen al and anspo p ojec s.
123

Economies 2024,12,28
F om his s udy’s analysis, i is e iden ha cohesion policy posi i ely inﬂuences
bo h economic g ow h and social p og ess. Howe e , i is c ucial o acknowledge ha
he impac s o his policy a e g adual, o en mani es ing o e se e al yea s. In es men s
like c ea ing new job oppo uni ies ake ime o gene a e economic beneﬁ s, and hei
e ec i eness is closely ied o add essing income inequali y and po e y educ ion.
To maximize he beneﬁ s o cohesion policy, policymake s should conside s a egic
alloca ions, emphasizing unds ha ha e shown p onounced impac s, like he CF, which
has shown conside able po en ial in p omo ing egional de elopmen , including educing
he isk o po e y.
Howe e , his s udy also iden iﬁes a no able gap in he Oppo uni ies segmen o he
SPI o CEE coun ies. This gap is c i ical as i di ec ly ela es o aspec s such as access o
highe educa ion and pe sonal igh s, which a e i al o b eaking he cycle o po e y and
ensu ing equi able g ow h. Add essing his gap equi es a ge ed in e en ions ocusing
on enhancing pe sonal igh s, elec o al choices, ole ance, and access o highe educa ion.
Fu he , add essing he gap in he Oppo uni ies dimension wi hin CEE coun ies is
essen ial. This is no jus abou economic de elopmen bu also abou ensu ing equi able
access o oppo uni ies, which is c ucial o long- e m po e y alle ia ion and na owing
income gaps. The ﬁndings highligh he need o a cohesi e app oach, combining s a egic
ﬁnancial in es men s wi h solid economic undamen als and e ec i e go e nance, o
ensu e egional de elopmen , social equi y, and educed income dispa i ies.
Rega ding esea ch limi a ions, one o he o emos challenges aced du ing he e-
sea ch was he accessibili y and comple eness o da a. Bo h da a se s ela ed o he cohesion
unds and social indica o s we e limi ed. Also, he limi ed numbe o exis ing s udies
explo ing he social impac o cohesion unds is a signiﬁcan cons ain ha cu ails he
abili y o jux apose cu en esea ch ﬁndings wi h p e ious wo k. The ime i akes o
he e ec s o he cohesion unds o become isible can be p olonged. De e mining his lag
be ween in es men and obse able impac can be complex, especially when i in e wines
wi h o he ex e nal ac o s. This makes a ibu ing speciﬁc ou comes o cohesion unds
di ﬁcul wi hou conside ing po en ial in e ac ions wi h o he ini ia i es.
The esea ch ﬁndings ha e subs an ial implica ions o policymake s, highligh ing he
e ec i eness o cohesion policy in na owing economic dispa i ies and p omo ing o e all
economic ad ancemen in CEE coun ies. Howe e , hey also call o an enhanced ocus on
social dimensions, pa icula ly in a eas whe e p og ess has been limi ed.
In conclusion, ou s udy ein o ces he impo ance o a comp ehensi e app oach o
assessing cohesion policy, one ha goes beyond adi ional economic me ics o include
a b oade spec um o social indica o s. This app oach is i al o accu a ely gauging he
policy’s impac and o in o ming u u e policy decisions aimed a p omo ing balanced
and inclusi e g ow h ac oss he CEE egion.
As u u e di ec ions o esea ch, gi en he Eu opean Commission’s e o s o simpli y
he cohesion policy, i would be aluable o in es iga e he impac s o such simpliﬁca ions.
Speciﬁcally, examining he consequences o educing he numbe o objec i es and ocusing
on digi iza ion and g eening can p o ide insigh s in o he policy’s e ﬁcacy unde his
s eamlined app oach.
In es iga ing he ela ionship be ween adminis a i e capaci y and he e ﬁciency o
und u iliza ion is also c ucial, pa icula ly in how i ela es o he equi able dis ibu ion o
economic gains and po e y educ ion.
Gi en ha he quali y o ins i u ions plays a pi o al ole in he e ec i e use o ﬁnancial
esou ces and in add essing inequali ies, u u e esea ch can explo e s a egies o bols e
ins i u ional quali y.
Ano he esea ch di ec ion, gi en he impo ance o he Oppo uni ies pilla in e-
ducing income inequali ies, is o esea che s o ocus on unde s anding i s componen s
be e . Fo ins ance, which aspec s o “Oppo uni ies” (like access o ad anced educa ion
o espec o pe sonal igh s) ha e he mos p onounced e ec on income inequali ies?
Such insigh s can guide a ge ed in e en ions.
124
Economies 2024,12,28
This s udy has hin ed a he po en ial o cohesion policies o add ess income inequali-
ies o u u e gene a ions. A logical ex ension would be o analyze he long- e m impac o
hese policies on income dis ibu ion.
Au ho Con ibu ions:
Concep ualiza ion, A.A.D. and T.M.N.; me hodology, A.A.D.; so wa e,
A.A.D.; alida ion, A.A.D., T.M.N. and M.-S.F.; o mal analysis, T.M.N.; in es iga ion, A.A.D. and
T.M.N.; esou ces, M.-S.F.; da a cu a ion, A.A.D.; w i ing—o iginal d a p epa a ion, A.A.D., T.M.N.
and M.-S.F.; w i ing— e iew and edi ing, A.A.D., T.M.N. and M.-S.F.; isualiza ion, A.A.D.; supe i-
sion, A.A.D.; p ojec adminis a ion, A.A.D.; unding acquisi ion, M.-S.F. All au ho s ha e ead and
ag eed o he published e sion o he manusc ip .
Funding:
The esea ch s udy has been elabo a ed wi hin he Da a Science Resea ch Lab o Business
and Economics o he Bucha es Uni e si y o Economic S udies, wi hin p ojec ID 585 PERFECTIS,
en i led ‘Inc easing Ins i u ional Pe o mance h ough he De elopmen o he In as uc u e and
Resea ch Ecosys em o T ansdisciplina y Excellence in he Socio-economic Field’, Funde : Minis y o
Resea ch, Inno a ion and Digi iza ion, con ac numbe and da e: 42PFE o 30 Decembe 2021.
In o med Consen S a emen : No applicable.
Da a A ailabili y S a emen : Da a a e con ained wi hin he a icle.
Conﬂic s o In e es :
The au ho s decla e no conﬂic s o in e es . The unde s had no ole in he
design o he s udy; in he collec ion, analyses, o in e p e a ion o da a; in he w i ing o he
manusc ip ; o in he decision o publish he esul s.
Abb e ia ions
Abb e ia ions Desc ip ions
EU Eu opean Union
GDP G oss Domes ic P oduc
CEE Cen al and Eas e n Eu opean
ERDF Eu opean Regional De elopmen Fund
SPI Social P og ess Index
PIGS Po ugal, I eland, G eece and Spain
HDI Human De elopmen Index
CF Cohesion Fund
ESF Eu opean Social Fund
ESIF Eu opean S uc u al and In es men Funds
EQI Go e nance Quali y Index
GNI G oss Na ional Income
Appendix A
Table A1. Desc ip ion o he a iable.
Indica o Deﬁni ion Sou ce Expec ed Impac
Dependen a iables
Economic Pe o mance
Real GDP/cap.
Real g oss domes ic p oduc exp essed acco ding o no.
inhabi an s Eu os a (+)
Social P og ess
Social P og ess Index (SPI) The Social P og ess Index measu es he p og ess o
socie y in h ee dimensions (Basic Human Needs,
Founda ions o Well-being and Oppo uni ies)
Social P og ess
Impe a i e (+)
125
Economies 2024,12,28
Table A1. Con .
Indica o Deﬁni ion Sou ce Expec ed Impac
Basic Human Needs The “Basic Human Needs” dimension o SPI Social P og ess
Impe a i e (+)
Founda ions o Well-being The “Founda ions o Well-being” dimension o SPI Social P og ess
Impe a i e (+)
Oppo uni y The “Oppo uni y” dimension o SPI Social P og ess
Impe a i e (+)
EQI Eu opean Go e nance Quali y Index GoQ Ins i u e Con ol a iable
Independen a iables
Cohesion Policy
ERDF Amoun o alloca ions om he Eu opean Regional
De elopmen Fund (eu o—deﬂa ed alues) Eu opean Commission
CF Amoun o alloca ions om he Cohesion Fund
(eu o—deﬂa ed alues) Eu opean Commission
ESF The amoun o alloca ions om he Eu opean Social
Fund (eu o—deﬂa ed alues) Eu opean Commission
Appendix B
Table A2.
Empi ical esul s o he impac o cohesion policy on economic pe o mance and
social p og ess.
Va iable M1 M2 M3 M4 M5 M6 M7 M8
Dep. Va : Log(Real GDP/cap.) Va . Dep. Social P og ess Index (SPI)
EQI 0.15 *** 0.17 *** 0.13 *** 0.18 *** 1.21 *** 1.09 *** 1.20 *** 0.91 ***
Log (In .GDP/cap.) −1 0.4 ** 0.34 ** 0.34 ** 0.35 ** 3.6 *** 3.58 *** 3.6 *** 3.58 ***
Log (in . To .ESIF/cap.) −1 0.05 *** 0.25 ***
Log (ERDF/cap.) −1 0.03 *** 0.13 ***
Log (CF/cap.) −1 0.04 **** 0.31 ***
Log (FES/cap.) −1 0.013 *** 0.10 **
No. obs. 594 592 585 590 590 594 592 585
No. coun y 10 10 10 10 10 10 10 10
No. Reg. 54 54 54 54 54 54 54 54
No. yea 12 12 12 12 12 12 12 12
Wald Tes 95.41 *** 78.37 *** 88.36 *** 51.30 *** 72.46 *** 162.84 *** 97.60 *** 220.83
R2
-wi hin 0.2276 0.1854 0.2405 0.1492 0.1593 0.1952 0.1648 0.2616
-be ween 0.3123 0.3173 0.3204 0.2988 0.3853 0.3856 0.3828 0.3940
-o e all 0.3082 0.3154 0.3079 0.2951 0.3738 0.3760 0.3739 0.3800
F Tes 208.67 *** 195.76 *** 199.65 *** 183.36 *** 213.56 *** 221.06 215.07 *** 230.80 ***
Hausman Tes p ob. 0.473 0.411 0.472 0.267 0.28 0.244 0.223 0.380
B eusch–Pagan LM Tes p . RE 2617.77 *** 2525.61 *** 2527.66 *** 2296.82 *** 2482.95 *** 2514.59 *** 2468.99 *** 2493.58 ***
C oss-sec ional Dependence
Tes —Pesa an CD Tes 80.005 *** 81.48 *** 70.85 *** 81.46 *** 78.20 *** 70.09 *** 74.23 *** 62.85 ***
Modiﬁed Wald Tes o
G oupwise He e oskedas ici y
in Fixed-E ec Reg ession Model 14,626.43 *** 12,297 *** 8329.32 *** 12,403.86 *** 13,738.81 *** 16,802.97 14,651.51 ***
0.0000 10,265.35 ***
Sou ce: Own calcula ions; No e: ****, *** and ** means signiﬁcan a 0.5%, 1% and 5% le el; () ep esen s he
p obabili y.
126
Economies 2024,12,28
Appendix C
Table A3.
Empi ical esul s o he impac o cohesion policy on social p og ess ( obus ness analysis).
Va iable M1
Basic Human Needs
M2
Founda ions o Well-Being
EQI 0.58 *** 2.99 ***
Log (In .GDP/cap.) 1.87 *** 4.31 ***
Log (in . To .FESI/cap.) −1 0.23 *** 0.59 ***
No. obs. 594 594
No. coun y 10 10
No. Reg. 54 54
N . ani 12 12
Wald Tes
PROB. 110.40 *** 188.06 ***
R2
-wi hin 0.1521 0.2085
-be ween 0.2176 0.4860
-o e all 0.2124 0.4276
F Tes 147.99 *** 41.75 ***
Hausman Tes p ob. 0.11 0.31
B eusch–Pagan LM Tes p . RE
2382.78 *** 1261.66 ***
C oss-sec ional Dependence
Tes —Pesa an CD Tes 80.86 *** 93.25 ***
Modiﬁed Wald Tes o
G oupwise He e oskedas ici y
in Fixed-E ec
Reg ession Model
30,454.34 *** 2495.04 ***
Sou ce: Own calcula ions; No e: *** means signiﬁcan a 1% le el; () ep esen s he p obabili y.
No es
1h ps://en.wikipedia.o g/wiki/Human_De elopmen _Index. Accessed on 12 Sep embe 2023.
2h ps://hd .undp.o g/da a-cen e /human-de elopmen -index#/indicies/HDI. Accessed on 14 Sep embe 2023.
3“Beyond GDP”. The Economis . 18 Ap il 2013. Re ie ed 2 Augus 2013.
4h ps://www.socialp og ess.o g/. Accessed on 6 Sep embe 2023.
Re e ences
Acemoglu, Da on, and James A. Robinson. 2012. Why na ions ail: The o igins o powe , p ospe i y, and po e y. Finance and
De elopmen -English Edi ion 49: 53. [C ossRe ]
Albanese, Giuseppe, Vincenzo Ca ie i, and Ma ia Speziali. 2021. Looking o a S a : E alua ing he E ec o he Cohesion Policy on
Regional Well-Being. A ailable online: h ps://www.econs o .eu/handle/10419/245572 (accessed on 6 Sep embe 2023).
Albulescu, Claudiu, and Daniel Goyeau. 2013. EU unds abso p ion a e and he economic g ow h. Timisoa a Jou nal o Economics and
Business 6: 153–70.
An onescu, Daniela. 2012. Iden i ying egional dispa i ies in Romania: A con e gence p ocess pe spec i e in ela ion o Eu opean
Union’s e i o ial s uc u es. P ocedia Economics and Finance 3: 1148–55. [C ossRe ]
A kinson, An hony B. 2015. Inequali y: Wha Can Be Done? Camb idge: Ha a d Uni e si y P ess.
Ba ca, Fab izio. 2009. Agenda o a Re o med Cohesion Policy. B ussels: Eu opean Communi ies. A ailable online: h ps://mig an -in eg a ion.
ec.eu opa.eu/lib a y-documen /agenda- e o med-cohesion-policy-place-based-app oach-mee ing-eu opean-union_en (ac-
cessed on 10 Sep embe 2023).
Becke , Sascha O., Pe e H. Egge , and Maximilian Von Eh lich. 2010. Going NUTS: The e ec o EU S uc u al Funds on egional
pe o mance. Jou nal o Public Economics 94: 578–90. [C ossRe ]
127
Economies 2023,11, 301
con as , acco ding o he queen bee heo y, o he emale manage s would no oppose
gende disc imina ion because hey belie e i would isk hei posi ion. As a esul , women
manage s may beneﬁ ou g oup membe s (men) by imi a ing hei beha iou s o ﬁ in
(Kaloge aki and Geo gakakis 2021) in an a emp o jus i y and p o ec hei posi ion in a
male-domina ed en i onmen .
Las ly, one ac o o conside is he ma ke ’s sec o al seg ega ion, which allows women
o be p omo ed o posi ions o esponsibili y in companies wi h a majo i y o women and
belonging o a eminised sec o . I is acknowledged ha sec o s wi h a high p opo ion o
women a e de alued in e ms o sala ies. This phenomenon could be explained h ough he
heo y o s uc u al occupa ional c owding (G oshen 1991; So ensen 1989) and he heo y
o he de alua ion o women’s wo k (England 1992). Acco ding o he o me , women ha e
a p opensi y o lowe -paying posi ions and he e o e a e c owded ou o highe -paying
jobs. The la e a gues ha emale-domina ed occupa ions ha e a lowe wage alue and/o
occupa ional p es ige han male-domina ed occupa ions simply because hey a e occupied
by women.
In line wi h he p e ious poin , he esul s ob ained by San e o-Sánchez and Cas o
Núñez (2022) o Spain show ha inc easing gende di e si y in manage ial posi ions only
had a signiﬁcan impac on educing he GWG when mo e women access hese posi ions in
companies managed by men. Thus, i is c ucial o examine he associa ion be ween GWG
and di e si y in company managemen om an analy ical iew.
In conclusion, he exis ing li e a u e ou lines he causes o bo h he glass ceiling and
he GWG and links hem; he GWG e e s o ano he ba ie unde he e m glass ceiling
(Be and e al. 2019), whe eas he unde - ep esen a ion o women in decision-making
posi ions leads men o decide he wages o subo dina e women wi h a gende bias. As
such, he p esence o women in leade ship posi ions is heo e ically associa ed wi h a GWG
educ ion, as hey can o m ne wo ks o suppo o he women and inﬂuence gende ed-bias
o ganisa ional s uc u es. Thus, an analysis o he impac o he p esence o women in
decision making on he GWG is necessa y. And i is o analy ical in e es o unde s and i s
e ec no only on he median wage bu also on he a ious le els o he wage dis ibu ion
because he GWG a ies depending on wage le els.
3. Me hodology
3.1. Measu ing Gende Equali y in Manage ial Posi ions
To measu e he deg ee o gende equali y in manage ial posi ions, we calcula e he
ollowing index1 o each es ablishmen in he sample:
GEMPj=1−
XF
j
XT
j
−XM
j
XT
j
(1)
whe e X
j
deno es he numbe o manage s in an es ablishmen j, and he supe sc ip s F,
Mand T ela es o emale, male and o al. Thus, he gende equali y index in manage ial
posi ions (GEMP) is calcula ed o each wo kplace, as one minus he di e ence in absolu e
alue in he sha e o emale and male manage s. Ou index is gende neu al since all
gaps, ega dless o whe he hey a e o he disad an age o women o men, a e aken
in o conside a ion and ea ed in he same way. The index akes alues in he in e al
[0,1], whe e 1 ep esen s gende equali y (equal sha e o emale and male manage s) and 0
ep esen s inequali y.
3.2. Baseline Es ima es
Following common p ac ice on p e ious empi ical wo ks analysing he gende wage
gap, ou depa u e poin is an augmen ed e sion o he adi ional wo kho se Mince ian
wage equa ion (Mince 1974). This equa ion es s on he p emise ha he wage o a wo ke
is de e mined by hei p oduc i i y, which, in u n, depends on he le el o educa ion
134

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