Kosta Josifidis

Adjustment mechanisms and exchange rate regimes in 2004 new EU members during the financial crisis

The global economic crisis confronted emerging European countries with abrupt external shocks, while adjustment mechanisms differed according to exchange rate regimes. ‘Fixers’ were forced to accept internal devaluation, while ‘floaters’ used the exchange rate as a shock absorber. Empirical research is based on six emerging European countries in January 2004–December 2010 and the January 2008–December 2010 crisis period. This article explores the real exchange rate as an adjustment mechanism variable, crisis transmission to the real economy, and foreign exchange intervention as a way of exchange rate management/defence. The relations investigated are observed using VAR models in order to distinguish between the groups of ‘floaters’ and ‘fixers’.

The European welfare state regimes: questioning the typology during the crisis

AbstractThis paper examines the nature of changes within the EU–15 welfare states affected by the 2008 crisis. We try to answer the question of whether the differences that exist among different welfare state regimes, according to prevailing welfare state typologies, lead to different responses to the consequences of the crisis. Welfare state regimes are the result of different institutional perceptions of social risks hence it is realistic to expect specific responses to the effects of crisis among different welfare state regimes, and similar responses among the countries that belong to the same welfare state regimes. In order to recognize convergent vs. divergent processes, we perform a comparative analysis of the dynamics of the key welfare state determinants of the EU–15 countries, grouping according to welfare state regimes, in the pre-crisis and crisis periods. The results indicate that institutional rigidity and inherent inertia has remained a key factor of convergent welfare state processes in cou...

European Welfare Regimes: Political Orientations versus Poverty

This inquiry analyzes how political orientations shape welfare states and labour market institutions when seeking to reduce poverty. In order to identify effects of these two key variables, we conduct a panel regression analysis that includes two poverty measures: poverty rates before and after social spending. This inquiry considers 14 EU countries, and in the period from 1995 to 2008, which are grouped according to welfare state regimes. We consider Social Democratic, Corporatist, Mediterranean and Liberal welfare state regimes. Panel regression results indicate that political orientation engenders no significant statistically measurable effects on poverty rates before social spending. Effects register, however, as significant when considering poverty rates after social spending. With respect to the first set of results, we advance two key explanations. First, we note a longer period of time is necessary in order to observe actual effects of political orientation on market generated poverty. Second, political parties with their respective programs do not register as influential enough to solve social problems related to income distribution when taken alone. Influences register as indirect and are expressed through changes in employment rates and social spending. The second set of results support the hypothesis that a selected political regime does indeed contribute to poverty reduction. In sum, political orientation and political regime does indeed affect poverty through welfare state institutions, as well as through labour market institutions.

Income Inequality and Workers’ Powerlessness in Selected OECD Countries

Abstract: Our goal is to show the effects of “elitization” on income inequality in affluent countries over the last two decades. By applying a robust regression model on a sample of twenty-one OECD countries, we observe that a high concentration of wealth by the richest “1%” of the population results in reducing the impact of trade unions on income redistribution through political institutions. Insufficient redistribution can be interpreted not only as the elites’ control over the resources that influence public policy and opinion, but also as affecting the evolutionary path of the economy. Moreover, this influence emphasizes the importance of traditional institutions and serves as an inspiration to reconsider the established social consensus regarding the welfare state.

The Meritocratic Elite vs. the Common Man: Income Inequality in the Affluent OECD Countries

Abstract: Our goal is to highlight the relationship between vested interests of the meritocratic elite and the deteriorating situation of the common man. We provide an example of rising income inequality in selected OECD countries over the past thirty years. Income inequality is growing, despite the increase in labor productivity based on technological progress, which we prove by using robust panel regression models. Our findings could be explained by the effect of “extreme meritocracy” that describes a situation in which wages for “the working rich” are growing faster than their productivity, and creating wage stagnation for the middle-class workers.

Income Polarization of the U.S. Working Class: An Institutionalist View

Abstract: We provide an institutional insight into the trend of income polarization within the U.S. working class. In contrast to the previous industrial waves, the current and ongoing industrial revolution is characterized by the replacement of “creative destruction” with jobless growth. Instead of replacing the lost jobs with new ones, new disruptive technologies eliminate more jobs in traditional labor and capital-intensive sectors than create jobs in new idea-intensive sectors. By examining the relationship between the income share of the bottom 50 percent, the middle 40 percent, and the top 10 percent and technological progress, we obtain robust econometric results. According to our results, the income polarization among U.S. workers can be associated with the shift of R&D activities from the public to the corporate sector. The concentration of innovations by corporate capital limits the power of society to reduce inequality and to provide greater social stability through “the incredible productivity” of technological progress.

Institutional Changes and Income Inequality: Some Aspects of Economic Change and Evolution of Values in CEE Countries

This article examines the effects of institutional changes on the dynamics of income inequality in postcommunist countries in Central and Eastern Europe (CEE). The results of a panel analysis suggest two types of institutional changes: endogenous, in the first period of transition, associated with worsening income distribution, and exogenous, in the second period of transition, associated with stabilization in income distribution. The persistence of high income inequality in the second period of transition is explained by a post-transitional tolerance for inequality, which reflects economic evolution but also indicates a possible evolution of values in CEE countries.

Is employment of social risk groups the key to sustaining the European welfare regimes

The European welfare regimes face two sets of challenges. One internal, specific for the welfare state itself, and the other external, imposed by changing economic, political and economics conditions. The first challenge lies in the growing gap between the rigid welfare state design and flexible social demands. Due to their unpredictable nature, the second challenge has received more attention in comparative welfare state studies. The core of the actual welfare state crisis is allocated in the economic problems that can be synthesised as the unemployment problem. Following this logic, in this paper we promote the thesis that employment of social risk groups is the key for sustaining the European welfare regimes. When the level of employment of poverty risk groups is high and the level of unemployment is low, more people contribute to the welfare state and the less draw on it, making any given level of redistribution more sustainable. Along with theoretical consideration, we use the balanced panel of 14 EU countries from 1995 to 2006 in order to provide some evidences that could support this thesis empirically.