Exploring the Moderation and Mediation Effects in Addressing the Main Determinants of Income Inequalities in Supporting Quality of Life: Insights from CEE Countries

Abstract

Income inequality has become an increasingly pressing economic and social problem in Europe, especially in emerging countries with more significant inequalities than the EU average. The high-level inequality persistence can decrease well-being by accentuating the shortcomings at the household level, increasing poverty and social exclusion, generating political instability, leading to a decline in social cohesion, and, finally, a weakening of the Union as a whole. In this context, the paper aims to identify the main determinants of income inequality across the CEE countries and their significant implications in supporting the quality of life and well-being, highlighting the mediation and moderation effects. The analysis focuses on emerging European countries, using panel-based data analysis for ten EU countries covering 2008–2019. The empirical findings highlighted the importance of the minimum wage, high-tech exports, the degree of economic openness, the quality of institutions, and education spending in reducing income inequality. On the other hand, the proportion of the population with a higher education level and the interaction between official and unofficial economies led to income inequality. Therefore, to increase the quality of life, it is mandatory to decrease inequalities. Thus, fewer people will be at risk of living a less qualitative life. The empirical results also proved that the informal economy and the share of people employed in industry exhibited mediating roles. In contrast, the economic growth, the urbanization degree, and the share of people employed in services exhibited moderating roles. Additionally, we also tested the impact of the income inequality determinants of the quality of life, the empirical results supporting the influence of minimum wage, employment with tertiary education, government effectiveness, the degree of economic openness, and education expenditures.

Assessment of the relationship between regional variability in the level of education and population income: application of multivariate comparative analysis

“…Numerous studies addressing income inequality as well as the causes and consequences of its widening can be found in the literature (Kawachi et al, 1997;Kuźmar, 2023;Polacko, 2021;Topolewski, 2020;Tusińska, 2018;Welch, 2001;Zhou & Song, 2016). Not only is the importance of studying inequality evidenced by the international institutions' expressed concerns regarding the persistence and growth of inequity, which is considered a major challenge of our time, but there is increasing talk of inequality worsening as an effect of pandemic shock (Davidescu et al, 2022). The consequences of inequality growth and persistence have been summed up by Deaton (2015) as follows: inequality harms not only poverty reduction, but also development.…”

“…The EU-27 differ significantly in terms of the indicators characterizing both EL and IL (Chart 2). The existence of considerable gaps in the levels of education and basic skills within Europe has also been studied by Bartak (2019), Vandeplas (2021) or Davidescu et al (2022), on the example of Central and Eastern European countries, using a panel analysis of ten EU countries. The present research also confirms existence of significant disproportions across the countries.…”