Research

1) The political process in nations: Civil society participation and income inequality (with Michael Chletsos & Konstantinos Kontos). Kyklos, Volume 77(3), August 2024, Pages 471-495. doi: 10.1111/kykl.12375
Abstract: This study delves into the influence of civil society participation on income inequality, a topic that has received limited scholarly attention. Civil society participation refers to the activities of citizens who organize into various groups, known as civil society organizations (CSOs), to pursue common interests and goals. These organizations span a wide range, including interest groups, labor unions, spiritual bodies engaging in civic or political activities, social movements, professional associations, charities, and other non-governmental entities. Our research utilizes an extensive panel dataset, encompassing a global sample of countries from 1975 to 2019. We aim to comprehensively analyze the direct effects of civil society participation on income inequality. Our findings reveal that higher levels of civil society participation are effective in reducing inequality over the short-, medium-, and long-term. These results have significant implications for policymakers. They suggest that encouraging and facilitating civil society participation could be a viable strategy for addressing income inequality. By understanding the dynamics of how civil society engagement influences economic disparities, policymakers can better design and implement measures that promote more equitable economic outcomes. This research contributes to the broader discourse on economic inequality and the potential role of civil society in mitigating it.

2) Political stability and financial development: An empirical investigation (with Michael Chletsos), The Quarterly Review of Economics and Finance, Volume 94, April 2024, Pages 252-266. doi: 10.1016/j.qref.2024.02.003
Abstract: The significance of political stability as a fundamental political institution within a country is widely acknowledged. However, the intricate interplay between political stability and the development of financial institutions and markets remains inadequately explored. Through an analysis encompassing 123 countries spanning the temporal interval of 1980 to 2017, a discernible pattern emerges: heightened levels of political stability substantively foster the advancement of financial development. This positive association is pronounced in countries characterized by greater government effectiveness, those enacting financial liberalization reforms, and those exhibiting a more democratic political structure. The results are robust to alternative measures of political stability, controlling for country heterogeneity, a two-stage least squares technique using internally generated instruments to address endogeneity issues, among several other robustness tests. Our results emphasize that countries should prioritize the creation of a more politically stable environment, as it not only improves growth prospects, but also creates a climate of confidence for economic agents to actively engage in financial markets.

3) Does inflation worsen income inequality? A meta-analysis, Economic Systems, Volume 47(4), December 2023, 101146. doi: 10.1016/j.ecosys.2023.101146
Supplementary material, including the Appendix, data and replication files, can be accessed here.
Abstract: Despite extensive econometric evidence, the research literature has been unable to draw firm conclusions regarding the effect of inflation on income inequality. In this paper, we apply meta-regression methods to a novel data set of 1767 estimates reported in 124 published studies that investigate the effect of inflation on income inequality. We distinguish between estimates that examine the effect of inflation on levels of income inequality and those that examine the effect of inflation on differences of income inequality. For level estimates, not controlling for moderator variables points to mild publication bias in favor of positive estimates (i.e., the current literature favors publishing studies that find that inflation increases income inequality), but publication selectivity does not hold once we control for a set of moderator variables. For difference estimates, mild publication bias in favor of negative estimates is found only once we control for moderator variables. In addition, our results suggest that inflation has a (small-to-moderate) inequality increasing effect for both level and difference estimates. Furthermore, we show that several factors influence reported estimates, including researcher choices concerning the measurement of inflation and inequality, the characteristics of data and estimation methods, and controlling for other components of inequality.

4) Financial development and income inequality: A meta-analysis (with Michael Chletsos), Journal of Economic Surveys, Volume 37(4), September 2023, Pages 1090-1119. doi: 10.1111/joes.12528
Replication files: click here to download the data and replication files for this article.
The supplementary Appendix of the article can be accessed here.
Abstract: The voluminous empirical research on the effect of financial development on income inequality has yielded mixed results. In this paper, we collect 2,127 estimates reported in 116 published studies that investigate the effect of financial development on income inequality. Although our initial tests for publication bias (which do not account for moderator variables) show that the current literature does not suffer from publication selectivity, once we control for a set of moderator variables, we find evidence of mild publication bias in favor of positive estimates (i.e., the current literature favors the publication of studies that find that financial development increases income inequality). In addition, our results suggest that the overall effect of financial development on income inequality is on average zero, but that its sign and magnitude depend systematically on various study characteristics. The characteristics of data and estimation methods, whether endogeneity is taken into account, the different measures of financial development and the inclusion of financial openness, inflation and income variables in the regressions matter significantly for the effect of financial development on inequality.

5) The effects of IMF conditional programs on the unemployment rate (with Michael Chletsos), European Journal of Political Economy, Volume 76, January 2023, 102272. doi: 10.1016/j.ejpoleco.2022.102272
Abstract: The fundamental mission of the International Monetary Fund (IMF) is to ensure global financial stability and to assist countries in economic turmoil. Although there is a consensus that IMF-supported programs can have a direct effect on the labor market of recipient countries, it remains unclear how IMF participation decision and conditionalities attached to IMF loans can affect the unemployment rate of borrowing countries. Using a world sample of countries from 1980 to 2014, we investigate how lending conditional programs of the IMF affect the unemployment rate. Our analyses account for the selection bias related to, first, the IMF participation decision and, second, the conditions included within the program. We show that IMF program participation significantly increases the unemployment rate of recipient countries. Once we control for the number of conditions, however, we find that only IMF conditions have a detrimental and highly significant effect on the unemployment rate. There is evidence that the adverse short-run effect of IMF conditions holds robust in the long-run. Disaggregating IMF conditionality by issue area, we find adverse effects on the unemployment rate for four policy areas: labor market deregulation, reforms requiring privatization of state-owned enterprises, external sector reforms stipulating trade and capital account liberalization, and fiscal policy reforms that restrain government expenditure. Our initial results are found to be robust across alternative empirical specifications.

6) The effects of IMF programs on income inequality: A semi-parametric treatment effects approach (with Michael Chletsos), International Journal of Development Issues, Volume 21(2), June 2022, Pages 271-291. doi: 10.1108/IJDI-12-2021-0265
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Replication files: click here to download the data and replication files for this article.
All-in-one .zip file can be downloaded here.
Media coverage: WHAT'S NEW SECTION JUMP - IMF-World Bank library
Abstract: This paper aims to provide new insights regarding the impact of International Monetary Fund (IMF) programs on income inequality. The paper uses a novel methodological approach proposed by Acemoglu et al. (2019), using (1) the regression adjustment, (2) the inverse probability weighting and (3) the doubly robust estimator, which combines (1) and (2), and a sample of annual data for 135 developing countries over the time period 1970 to 2015. The findings show that IMF programs are associated with greater income inequality for up to five years. By differentiating the effect of IMF programs, the authors find that only IMF non-concessional programs have a significant detrimental effect on income inequality, while IMF concessional programs do not have a consistent effect on income inequality. In addition, the authors find that only IMF programs with a higher number of conditions have a detrimental and statistically significant effect on income inequality, compared to IMF programs with a smaller number of conditions, where their effect on income inequality is found to be insignificant. To the best of the authors’ knowledge, the analysis developed in this paper contributes to the existing literature by applying the most methodologically sound identification strategy, which does not rely on the linearity assumption, the selection of instruments or matching variables and additionally takes into account the selection bias related to IMF program participation.

7) Hide and seek: IMF intervention and the shadow economy (with Michael Chletsos), Structural Change and Economic Dynamics, Volume 59, December 2021, Pages 292-319. doi: 10.1016/j.strueco.2021.09.008
Abstract: By explicating the mechanisms through which International Monetary Fund (IMF) programs operate, this study investigates the effect of IMF intervention on the shadow economy. Using a sample of 141 countries from 1991 to 2014, we examine the impact of both IMF participation and conditionality on the informal economy. Our analyses address sources of endogeneity related to, first, the IMF participation decision and, second, the conditions included within the program. The empirical findings suggest that both IMF program participation and conditionality increase the size of the shadow economy. Disaggregating IMF conditions into structural and quantitative shows that only structural conditions are significantly related to a larger shadow economy both in the short- and long-term. Financial development can reduce the size of the shadow economy, yet it cannot reverse the detrimental effect of IMF conditions. Our initial results are found to be robust across alternative empirical specifications.

8) The effect of financial fragility on employment (with Michael Chletsos), Economic Modelling, Volume 94, January 2021, Pages 104-120. doi: 10.1016/j.econmod.2020.09.017
Abstract: Financial fragility increases economic uncertainty and restricts credit to firms, leading to lower economic growth and employment. Despite voluminous research on the relation between financial fragility and growth, the effect of financial fragility on employment is understudied. Using a global panel for the period 1998–2017, we identify a negative effect of financial fragility on employment, even after accounting for unobserved country heterogeneity. The impact of financial fragility is stronger in the post-crisis period and in more rigid labor markets, and the magnitude of the effect is higher in developing/emerging economies than in developed countries. Nevertheless, this negative effect can be mitigated in countries with a higher level of financial market development. Our results are robust to the use of several robustness tests, including different measures of financial fragility and an instrumental variables approach.