George Petrakos, Maria Tsiapa, Dimitris Kallioras (p)

Mikołaj Herbst

There is a long theoretical and empirical discussion in the literature connecting income inequalities and business cycles that is mostly centred around two distinct, but interrelated, research questions. The first question is related to the impact of growth on inequality. If the process of economic growth in mixed market economies leads to increasing income inequalities, it is implied that growth has a social cost that cannot be ignored for long time. In contrast, if the process of economic growth tends to make the pie not only bigger, but also more equally shared, then it is more inclusive and perhaps more sustainable. A new set of questions, of course, arises about the role of market dynamics or public policy options in reducing inequality across the different varieties of capitalism and the conditional factors that facilitate or impede their impact. The second question reverses the way of the causality and is related to the impact of income inequality on economic growth. This is an important question with a simple logic: if inequality impedes growth, then it is not just a social issue or an issue of income distribution that can be discussed separately, but a central issue of economic development, as it reduces the size of the pie and is a matter that affects the entire economy, not just the poor people. On the other hand, if inequality is augmenting growth, the discussion is very different, as it involves a growth-inequality trade-off and more questions about the level of inequality that can be tolerated as a sacrifice for higher growth. Of course, income inequalities and economic growth are linked by a causality relationship as the former might affect the latter and vice versa. The paper intends to address these two extremely important research questions in a comprehensive way that provides policy relevant results with the use of recent data sets that allow for a better depiction of income inequality over time and across countries. The analysis covers the period 1995-2020 and focuses on the EU countries (i.e., 27 countries). The outbreak of the recent crises incited the interest of researchers and policymakers about the behaviour of income disparities in relation to business cycles. Including a number of novelties and providing clear-cut empirical evidence, the paper contributes to a better understanding of the dynamics of the growth - inequality dipole and provides recommendations that can be translated into policy action.

Spyros Niavis (p), George Petrakos, Yiannis Saratsis, Paschalis Arvanitidis

Dimitris Kallioras

Inequality can be approached from different academic perspectives, but it allows for both positive and normative approaches. The subjective nature of inequality can lead to conflicting priorities among members of society, creating challenges for collective action. Academia can play a significant role in providing clear evidence of the types of inequalities prevailing in each country and drive essential policy interventions.
Considering these remarks, the present paper draws on experts’ knowledge and incorporates the Delphi method to shed light on many different research questions around the phenomenon of inequality. Essentially, the analysis addresses the question of “What is inequality, and how can we best deal with it?”. The Delphi method was implemented with a questionnaire instrument of 47 questions on a sample of 189 experts indicated by the partners of the ESSPIN Horizon EU Project.
The preliminary results revealed many interesting insights with both theoretical and policy implications. One key finding is that the experts primarily conceive an equal society as providing equal treatment to everyone, ensuring that equal opportunities are provided to all members of society, and eradicating any existing exclusion mechanisms. Therefore, experts prioritize inclusion and opportunities over other forms of inequality.
Moreover, when experts were faced with actual and hypothetical distributions of wealth and income, they showed a pro-egalitarian attitude, as they preferred national income allocations that are far more equal than those in the real world. It could be said that the experts accept some inequality but only when this is limited within reasonable thresholds.
In addition, experts recognize the unleashed power of capitalism and the inability of the state to secure an equal distribution of societal outputs as the main drivers of income inequality and the agglomeration dynamics, with the unequal concentration of human capital and large firms as the most important drivers of regional inequalities.
Finally, on the policy side, experts mostly agree with policies that eradicate exclusions and level the playing field for all citizens, and their greatest support goes to pre-market policies, which call for a state able to provide necessary conditions for personal development, such as health and education, to all society members. This is the case for the policies against income inequalities but also for the eradication of regional inequalities.
The research is complemented by factor and correlation analyses whose preliminary results are used to gain fresh insights into the dimensions of inequality and feed relevant policy recommendations.

Dimitris Kallioras (p), Maria Tsiapa, George Petrakos

Spyros Niavis

Against the backdrop of the EU economic integration process, the paper brings together a couple of distinct strands of literature, thus adding a salient perspective to the economic integration literature, studying a couple of distinct – though highly related – issues: (a) the patterns of regional business cycles synchronicity; (b) the impact of business cycles on regional inequalities. Business cycles are defined as “a type of fluctuation found in the aggregate economic activity of nations that organize their work mainly in business enterprises”. Ergo, business cycles refer to the concerted cyclical upswings and downswings that characterize a span of macroeconomic variables - the most notable one is real GDP – and aggregate economic activity, in general. Typically, business cycles consist of a quartet of recurrent, but not periodic, stages: (a) expansion; (b) crisis; (c) recession; (d) recovery. Apparently, the notion of business cycles is not compatible with the neoclassical understanding of the (spatial) economy, which operates always in equilibrium and the only variations from a steady-state growth path may be arising from random or external shocks. Utilizing EUROSTAT data that refer to 276 EU regions (NUTS II level) and covering the period 1990-2020, the paper presents clear-cut empirical evidence, gained using sound and rigorous methods of empirical analysis, and provides a novel contribution to an area of research that has been (re-)gaining increasing interest. This is so as macroeconomic shocks – that influence regional inequalities – are considered to be the main driving forces behind business cycles.

Justyna Wilk (p), Tomasz Kossowski (p)

Dimitris Kallioras

Over the last two decades, Europe has experienced a series of economic, political and social challenges. Many activities have been taken to improve regional economic cohesion such as the enlargements of the European Union, the enlargements of the Eurozone, the creation of the Eurasian Economic Union, etc. But some other circumstances could disrupt the cohesion process, such as Brexit, the global financial and economic crisis, the wars in Ukraine, the migration crisis in Europe, the COVID-19 pandemics, etc. They all affect not only national but also regional economies.
The aim of our paper is to find out how resilient European regional economies are to economic, political and social shocks, whether these shocks affect developing and well-developed regions in a similar way, and which of these shocks favour regional disparities or strengthen regional cohesion.
We analyse the situation of almost 400 regions from more than 30 European countries (including Russia, Belarus, Ukraine, Turkey etc.) over the last two decades. We use regional GDP per capita as an indicator of economic activity. We use Eurostat, OECD and national statistics to create a panel dataset. We define a series of sub-periods to account for economic, political and social shocks. We start with a series of convergence models for each sub-period. We apply the long-t test with clustering and merging algorithms to identify the convergence clubs and their members.

Mikołaj Herbst (p)

Justyna Wilk

The research is aimed at better understanding the territorial differences in resilience to COVID. We focus on two outcomes of the pandemic: health-related (mortality) and economic (income). More specifically, the health-related outcome is measured by excess mortality, that is mortality above the expected value resulting from the extrapolation of local (pre-pandemic) trends in a given location. In turn, the economic effect is proxied by the change in average personal income achieved by the local taxpayers (2021 as compared to 2019).

The research is divided into two phases. In phase 1 we apply traditional data modelling using standard specification from the analysis of conditional convergence
In phase 2, the impact of independent variables on local resilience to COVID is examined using machine learning algorithms. This approach involves an extensive testing for nonlinearities and spatial correlations.