Please read our student and staff community guidance on COVID-19
Skip to main content Skip to navigation

Inequality: mechanism, effects and policies (INEQ)

The research project aims to study the causes, the mechanisms, and possible solutions, to economic and social inequality both within and around Europe. It brings together a consortium of seven European universities and research centres. The project has received funding from the European Commission under the Framework 6, Priority 7, programme. CSGR co-ordinates one of the nine research programmes within the project. You may have access to the following information:

- The project website: www.criss-ineq.org/

- The project summary

- The participants in the project

- The summary of the research programme co-ordinated by CSGR

- The objectives of the research programme co-ordinated by CSGR

- The CSGR research team

- Papers produced for the project 

- The final policy brief, presented at the final seminar at the EU Commission.

Summary of the project

The evolution of inequalities in terms of incomes, economic, social and gender conditions, both within and between countries, is a major concern for scholars and policy makers. The project has three objectives:

a. investigate the economic and social mechanisms that are producing polarisation and inequality within European countries, within EU neighbouring Countries;

b. investigate the effects inequality has in societies, and its relations with economic performance and social integration;

c. identify actual and possible policies - at the national, EU and global levels.

Three key economic mechanisms that may lead to inequality will be studied, with a focus on EU countries and on a group of neighbouring countries. They include: the impact of technological change and human capital; the impact of global trade, FDI and finance. They will be integrated into a general economic modelling for EU countries that may allow simulating the inequality impact of different policies.

Considering social processes, the gender and ethnic/immigrant factors leading to social polarisation and inequality will be addressed in the case of EU countries; the social dynamics reacting to national and global inequalities will be investigated focusing on the activities of non state actors and on collective mobilisations challenging current policies.

In terms of policy, a variety of economic (taxation, expenditure, welfare reform, etc.) and social (on gender, immigrant, social rights) policies that affect inequality within Europe will be analysed, showing how public decision making contributes to or restrains the mechanisms leading to inequality and their effects. A policy blueprint will be prepared with detailed recommendations on how national and EU policies could contribute to reduce inequalities.

Globalisation and regional integration: their impacts on employment and inequality in EU neighbouring countries

 

Abstract

The Work Package 4 focuses on the European Union neighbouring developing countries (EUNDC), seeking to investigate the economic and social impact that globalisation and integration with the EU has had on them. Possible feedbacks to the EU in terms of migration, brain drain and remittances, are also investigated. After a general theoretical and empirical overview of the situation of EUNDC over the last two decades, the Work Package develops a theoretical and econometric approach to understand the nature of this process. The theoretical framework enables us to study the consequences of globalisation on EUNDC income inequality, labour market dynamics, and structural change. The econometric analysis verifies whether the import of capital-embodied technology and FDI inflows from richer countries (and specifically EU countries) play a significant role in affecting the labour markets in the receiving countries. Finally, policy analysis will take into account both EU and EUNDCs, addressing issues of economic and political integration, as well as those concerning migration flows.

Further information can be found on the following website: www.criss-ineq.org/

Objectives

The goal of this Work Package is to study the impact of globalisation (trade, FDI and technology transfer) and regionalisation (economic and political integration with the E.U) on employment and income inequality in EU neighbouring middle income developing countries (EUNDCs), also taking into account possible feedbacks to the EU in terms of migration, brain drain and remittances.

In the last two decades, EUNDCs - namely: North Africa, Middle East, Eastern Europe and Western Asia - have been characterised by a process of globalisation and economic and political integration with the EU. At the same time, some of them have experienced a phase of economic and social instability, characterised by persistent unemployment, increasing within-country income inequality (WCII), and political turmoil. This has clearly had an impact in terms of social exclusion, political disaffection and migration flows, which obviously may bear consequences to the EU, too.

The topic will be explored through a four-stage research programme: 1) general theoretical and empirical overview; 2) theoretical model and economic policy simulations; 3) empirical estimates; 4) policy suggestions, and an assessment of their feasibility.

The first aim of the Work Package is to provide a critical overview of what has happened in the last two decades in the EUNDCs in terms of their openness to global markets, economic development, labour market dynamics and income distribution. International datasets provided by the UN, IMF, WB and OECD will be used and merged for this purpose.

The theoretical framework aims to assess the impact of globalisation – through increased trade and imported labour-saving and skill-biased technologies – on EUNDC income inequality, labour market dynamics, and structural change. In particular, the framework will seek to unearth several possible mechanisms of this process. On the one hand, importation of skill-biased technologies may determine a decrease in the demand for unskilled workers and an increase in the skill premium, with non-obvious consequences on employment and domestic inequality. On the other hand, the economic development and widening wage gaps triggered by globalisation may induce unskilled workers to invest more in the formation of human capital through education, learning and training. The theoretical framework aims to understand the nature of these trade-offs, as well as the feedback on the EU in terms of labour flows and trade. The model uses a calibration technique that applies data for both the EUNDC and the EU to the theoretical framework. This also permits the study of the impact of different policies of integration on the economies of the countries involved.

The empirical analysis will start from the investigation of the role of globalisation and regionalisation in explaining increasing WCII in a selected sample of EUNDCs. The econometric analysis will verify whether the import of capital-embodied technology and FDI inflows from richer countries (and specifically EU countries) do play a significant role in affecting the labour markets in the receiving countries, along the lines provided by the theoretical model described above. A comparison among countries at different stages of their integration process with the EU will also be developed.

Finally, labour migration flows to EU countries from EUNDCs will also be investigated. The analysis of migration will include the higher mobility across EU countries, the network effects at the root of migration flows, the resulting flows of remittances and their impact on EUNDCs economies. This investigation will pave the way for a policy analysis that will take into account both EU and EUNDCs. This will address the issues of economic and political integration, as well as those concerning migration flows.

Team

Unit director

Jan Aart Scholte, Co-director of the Centre for the Study of Globalisation and Regionalisation (CSGR); Professor in the Department of Politics and International Studies, Warwick University; email address: Scholte@warwick.ac.uk

Unit co-ordinator

Gianluca Grimalda, CSGR research fellow; g.f.grimalda@warwick.ac.uk

Unit collaborators

Jeff Round, reader in the Economics Department, Warwick University; CSGR associate; J.I.Round@warwick.ac.uk

Andrea Conte, Ph.D. candidate, University of Turin; conteandrea@gmail.com

Elena Meschi, Ph.D. candidate, University of Ancona; elenameschi@yahoo.it

Database provider and statistics consultant

Marco Vivarelli, Professor in the Economics Department, Catholic University of Piacenza; marco.vivarelli@unicatt.it

Papers produced within the project

"Accounting For Inequality in Transition Economies: An Empirical Assessment of Globalisation, Institutional Reforms, and Regionalisation". CSGR Working Paper N. 243/08 (G. Grimalda and E. Meschi).

"Globalization vs. Internal Reforms as Factors of Inequality in Transition Economies: An Empirical Analysis" (D. Barlow, G. Grimalda and E. Meschi). Forthcoming on the International Review of Applied Economics, May 2009.

"Trade Openness, Technology Adoption and the Demand for Skills: Evidence from Turkish Microdata" (Elena Meschi and E. Taymaz)

"Income Inequality and Technical Change in European Union Neighbouring Developing Countries: A Calibration Exercise" (G. Grimalda)

"Varieties of Capitalism and Varieties of Performances: Accounting for Inequality in Post-Soviet Union Transition Economies" (G. Grimalda and E. Meschi)

"Macroeconomic Determinants of Migrants’ Remittances in the Southern and Eastern Mediterranean Countries" (E. M. Mouhoud, J. Oudinet, E. Unan)

"Impacts of Migrations: a Comparison between the EU and the US labor market" (E. M. Mouhoud, J. Oudinet)