REVIEW

FOR THE EVALUATION OF THE DOCTORAL DISSERTATION "INCOME INEQUALITY DETERMINANTS – DEVELOPED VS. DEVELOPING EUROPEAN COUNTRIES" BY MSC KRISTINA VELICHKOVSKA, SUBMITTED TO FACULTY OF ECONOMICS AND ADMINISTRATIVE SCIENCES, INTERNATIONAL BALKAN UNIVERSITY – SKOPJE

 

Based upon Article 136, item 6 and 10, of the Law on Higher Education (“Official Gazette of the Republic of Macedonia” No. 82 from 08.05.2018), Article 82 of the Statute of the International Balkan University, and Article 39, 44, 45 and 46 of the Third Cycle Studies Regulation, with the Decision for topic, mentor, and commission of the doctoral project No. 202.12/2022 from 10.05.2022, and the Decision for the adoption of the Mentor’s report of the doctoral dissertation No. 202.19/2024 from 22.03.2024, the Teaching – Academic Council of the Faculty of Economics and Administrative Sciences, International Balkan University in Skopje, at the session, held on 22.03.2024, with decision number 202.20/2024 from 22.03.2024, formed a Commission for the evaluation of the doctoral dissertation of the candidate M.Sc. Kristina Velichkovska with the title “Income Inequality Determinants – Developed vs. Developing European Countries”.

 

The Commission for the evaluation of the Doctoral Dissertation consists of:

1.      Prof. Dr. Snezana Bilic - President of the commission

2.      Prof. Dr. Violeta Madzova – Mentor

3.      Assoc. Prof. Dr. Luljeta Sadiku - Member

4.      Assoc. Prof. Dr. Liza Alili Sulejmani - Member

5.      Assoc. Prof. Dr. Besime Ziberi - Member

 

 

After the evaluation of the content of the doctoral dissertation, the Evaluation Commission submitted the following:

 

R  E  P  O  R  T

For the evaluation of the Doctoral Dissertation entitled

“Income Inequality Determinants – Developed vs. Developing European Countries”

 

ANALYSIS OF THE WORK

The doctoral dissertation of the M.Sc. Kristina Velichkovska, entitled “Income Inequality Determinants – Developed vs. Developing European Countries”, contains 220 pages (without references and appendices) of computer-processed text in Times New Roman font, with 1.5 spacing and letter size 12, with 16 footnotes, 373 bibliographic units, among them scientific papers, articles, books, national regulations, international acts and internet resources.

The paper is structured into 6 chapters, including an introduction and concluding observations. The parts are systematized in points and sub-points with titles and sub-titles, which ensures proper tracking of the matter that is dealt with in the research.

The doctoral dissertation starts with an abstract that serves as a concise summary of the research conducted. It outlines the main problem addressed in the study, which is the analysis of income inequality across 40 European countries during significant economic crises spanning from 2007 to 2021. The abstract also highlights the research objectives, which include identifying the determinants of income inequality, examining variations in these relationships across countries, and comparing the impact of different crisis periods on income inequality dynamics. Additionally, the abstract mentions the research methodology employed, such as panel data analysis using fixed and random effects regression models, along with advanced techniques like Least Squares Dummy Variable (LSDV) and System GMM estimation. Furthermore, it briefly discusses the key findings of the research, including insights into the correlations between income inequality and various macroeconomic, demographic, and political factors.

The Introduction chapter of the doctoral dissertation sets the stage for the study that follows. It begins by explaining the subject matter and delving into the contextual background, offering readers a comprehensive understanding of the research's origins and relevance. Then, it describes the main problem the research aims to solve, outlines what the goals of the study are, and lists the questions the research seeks to answer. Methodological approaches employed in the research process are outlined, underscoring the rigor and comprehensiveness of the analytical framework. Furthermore, it underscores the significance of the study in contributing to existing literature and addressing relevant socio-economic issues while also acknowledging the limitations this research might have. Finally, the organizational structure of the dissertation is explained, providing readers with a roadmap for navigating the subsequent chapters and understanding the logical progression of the research narrative.

The second chapter of the doctoral dissertation entitled “Understanding Income Inequality - Concepts, Metrics, and Implications” explores comprehensively the concept of income. Various types of inequalities are discussed, focusing particularly on economic inequality and its manifestations. Income inequality as one of the economic inequality types is closely observed by distinguishing this phenomenon from the concepts of wealth inequality and poverty. Different metrics used to measure income inequality are introduced. A historical overview of the phenomenon of income inequality and its development through the years is introduced. The chapter also addresses global concerns, consequences, and strategies for addressing income inequality. Lastly, it includes a focused analysis of income inequality during crises in the 21st century, exploring the direct economic effects of these crises, the efficacy of crisis-resolution policies in mitigating income disparities, and the key characteristics of these crises, to provide a comprehensive understanding of their impact on income distribution.

The third chapter of the doctoral dissertation is entitled “Theoretical Foundations and Empirical Literature Review of Income Inequality Determinants”. This chapter explores the theoretical foundations of income inequality, delving into prominent theories such as Kuznets's inverted U-shaped curve, as well as contributions from scholars like Piketty and Milanovic. This chapter aims to assess the relevance of these theories in the contemporary European context, particularly in comparing income inequality dynamics between developed and developing European countries. Additionally, the chapter conducts an extensive literature review on income inequality determinants. It categorizes these determinants into economic development, demographic, political, cultural, environmental, and macroeconomic factors, providing a comprehensive framework for empirical analysis. By synthesizing insights from prior research, the chapter establishes a conceptual foundation for understanding the multifaceted nature of income inequality and its underlying determinants.

The fourth chapter entitled “Data Analysis and Research Methodology on Income Inequality Determinants” provides a comprehensive methodological framework for investigating income inequality in European countries amidst 21st-century economic crises. This chapter outlines the research design, research questions, hypotheses, data sources, sampling techniques, and data analysis methods. Emphasizing a quantitative approach, the chapter meticulously justifies the chosen methodology within the context of the research objectives, ensuring the thorough examination of income inequality determinants. Through a systematic exploration of extensive datasets sourced primarily from the World Bank, the study aims to uncover nuanced relationships between income inequality and various economic, demographic, and political factors. By employing robust statistical techniques such as fixed effects estimation, random effects estimation, and system Generalized Method of Moments (GMM) estimation, the chapter lays the groundwork for rigorous hypothesis testing and empirical analysis. Ultimately, this methodological framework serves as a crucial foundation for generating valuable insights into income inequality dynamics and informing policy recommendations for promoting equitable socioeconomic outcomes in Europe.

The fifth chapter entitled “Empirical Results of Income Inequality Determinants” presents the results of the empirical analysis of income inequality determinants. The chapter offers a comprehensive examination of income inequality determinants through empirical analysis. It encompasses a range of analytical methods, including descriptive analysis, trend analysis, and correlation matrices, to uncover patterns and relationships within the data. Additionally, the chapter conducts baseline regression analysis using fixed and random effects models, as well as advanced regression analysis using techniques like the Least Squares Dummy Variables and the two-step system Generalized Method of Moments. These methods enable a thorough investigation into the factors influencing income inequality. Finally, the chapter concludes by offering a discussion of the results section which interprets the empirical findings in light of the research objectives, theoretical framework, and existing literature. Furthermore, it answers the research questions and research hypotheses of the study.

To summarize all findings and key points, the Conclusion and Recommendations chapter summarizes the key findings of the study, discusses their implications, and reflects on the research process. It reiterates the significance of the research, addresses research questions and hypotheses, and suggests directions for future research in the field of income inequality studies. Furthermore, it offers practical recommendations aimed at addressing income inequality in Europe. These recommendations are tailored for policymakers, researchers, and stakeholders, emphasizing collaborative efforts and innovative approaches to effectively mitigate income disparities.

The final part References covers different sources, such as books, articles, reports, and websites that helped with writing the dissertation.

 

Subject of research

The subject of research in this doctoral dissertation centers on the enduring challenge of income inequality across Europe, despite notable strides in economic development and policy implementation. It addresses a complex issue encompassing economic, social, and political dimensions, necessitating a comprehensive examination of its underlying determinants. Given the diverse landscape of Europe, characterized by varying economic statuses, institutional arrangements, and social contexts, an inclusive analysis considering these diversities is imperative. Furthermore, the study investigates how economic crises, including the global financial downturn and sovereign debt crises, impact income inequality dynamics during distinct periods. Addressing this challenge entails navigating methodological hurdles, such as data limitations and intricate statistical analyses. Moreover, translating research findings into actionable policies necessitates effective communication between researchers and policymakers. The study aims to shed light on the intricate relationship between income inequality and its determinants, particularly within the context of Europe's heterogeneous development levels. By scrutinizing the period from 2007 to 2021, which spans multiple crisis episodes, the study examines pivotal factors shaping income distribution dynamics amidst tumultuous times. Additionally, it aims to identify discrepancies in income inequality between developed and developing European countries and their variations across different crisis contexts. Ultimately, the study aims to enrich the understanding of income inequality in Europe and furnish evidence-based policy prescriptions to foster equitable and inclusive economic growth.

 

Data on the state of the area in which the dissertation was done

Income inequality stands as a persistent challenge across the European continent, particularly amidst the economic turmoil experienced during the 21st century. Despite numerous advancements in economic development and policy implementations, the prevalence of income disparity remains a significant concern, encompassing multifaceted economic, social, and political dimensions. The repercussions of income inequality extend beyond mere economic disparities, profoundly impacting social cohesion, exacerbating poverty and social exclusion, and impeding overall economic progress.

Existing scholars have shed light on various factors contributing to income inequality, including economic globalization, unemployment rates, governance quality, and demographic shifts. However, most studies have tended to focus on individual determinants in isolation, overlooking the intricate interplay among these factors that shape income distribution. Moreover, there exists a scarcity of research that comprehensively examines the combined influence of these determinants, particularly during periods of economic crisis—a pivotal aspect that can significantly influence income inequality dynamics.

Against this backdrop, this doctoral dissertation seeks to address this gap by undertaking a thorough analysis of income inequality dynamics in Europe during the tumultuous periods of economic crisis spanning from 2007 to 2021. Drawing insights from an extensive literature review, the study aims to develop a nuanced understanding of the complex interactions among macroeconomic, demographic, and political factors shaping income distribution patterns.

Given the diverse economic, institutional, and socio-political contexts across European countries, the study recognizes the need for an integrated analysis that accounts for this heterogeneity. Furthermore, the impact of different crisis periods on income inequality remains underexplored, necessitating a comprehensive examination to elucidate the nuances of these relationships. Methodological challenges, including data limitations and endogeneity, underscore the importance of employing advanced econometric models to ensure the robustness and reliability of the findings.

By shedding light on the determinants of income inequality and their variations across different crisis contexts and levels of economic development, the research aims to inform evidence-based policymaking aimed at promoting inclusive growth and reducing income disparities in Europe.

 

Brief description of applied methods

This doctoral dissertation employs a comprehensive methodological framework to investigate the determinants of income inequality in Europe during the 21st-century economic crises. The research methodology is designed to address three primary research inquiries: identifying the principal determinants of income inequality during crisis periods, examining variations in relationship patterns across European countries based on their development levels, and investigating differences in these relationships during distinct crisis events, such as the global financial crisis and sovereign debt crisis.

To address these inquiries, the study utilizes both fixed and random effects panel data regression models. Fixed effects models help account for time-invariant country-specific characteristics, while random effects models accommodate unobserved heterogeneity across countries. These models allow for a nuanced analysis of the relationship between income inequality and its determinants while controlling for country-specific factors.

Additionally, the research employs the Least Squares Dummy Variable (LSDV) technique with interaction terms to explore how the effects of income inequality determinants vary across different development levels and crisis periods. LSDV helps capture the unique impact of each determinant in varying contexts, facilitating a more nuanced understanding of income distribution dynamics.

Furthermore, the study utilizes the advanced method of System GMM estimation to address potential endogeneity issues and capture the lagged effects of determinants on income inequality. System GMM estimation allows for dynamic analysis of income distribution dynamics by incorporating both contemporaneous and lagged effects of variables.

Throughout the analysis, dummy variables are employed to capture the effects of the development level of countries and the different crisis periods. These dummy variables serve to control for the contextual factors that may influence income distribution dynamics, ensuring a robust and comprehensive analysis.

 

A brief description of the research results

The research investigating the determinants of income inequality in both developed and developing European countries, particularly during the tumultuous economic landscape of the 21st century, showed several relevant conclusions. These findings serve as a valuable foundation for policymakers crafting macroeconomic strategies aimed at addressing income inequality across Europe.

Macroeconomic determinants, such as economic globalization, unemployment, remittances, and gross domestic savings, emerge as significant factors influencing income inequality. Economic globalization, characterized by deeper economic integration, exhibits a negative correlation with income inequality, suggesting its potential to narrow income disparities in Europe. This finding highlights the role of economic connectivity in fostering equitable wealth distribution. Conversely, unemployment shows a positive correlation with income inequality, underscoring the socio-economic implications of employment policies in achieving equitable growth. The positive relationship between remittances and income inequality reflects the unequal impact of remittance inflows on income distribution. Furthermore, domestic savings demonstrate a negative correlation with income inequality, indicating that higher savings rates may signal a more equitable income distribution.

Demographic determinants, including population growth and mean years of schooling, also play a significant role in income distribution dynamics. Population growth exhibits a consistently positive impact on income inequality, reflecting structural challenges associated with rapid population increases. Mean years of schooling, serving as a proxy for education, display a nuanced impact, with higher education levels correlating with decreased income inequality in developed countries but increased inequality in developing ones. This finding underscores the complex relationship between education, employment opportunities, and income distribution.

Political determinants, encapsulated by governance indicators such as regulatory quality, government effectiveness, political stability, and control of corruption, emerge as crucial factors shaping income inequality. Regulatory control and government effectiveness exhibit consistent negative associations with income inequality, highlighting the importance of effective governance in promoting equity. However, the positive impact of political stability and control of corruption on income inequality in certain models underscores the need for further examination of their nuanced effects. Additionally, the different impact of the rule of law suggests differential effectiveness across developed and developing countries, emphasizing the importance of context in shaping institutional frameworks and their impact on income distribution.

Moreover, the study delves into the conditional nature of economic development's impact on income inequality, particularly during crisis periods such as the global financial crisis and the European sovereign debt crisis. The multifaceted relationship between GDP per capita and income inequality underscores the complexity of economic growth dynamics and their implications for income distribution. The findings confirm the Kuznets curve hypothesis, revealing an inverted U-shaped relationship between economic development and income inequality. This pattern highlights the contextual sensitivity of economic development's impact on income distribution and underscores the need for tailored policy responses based on specific economic conditions and crisis contexts.

Furthermore, the study examines variations in the relationship patterns of income inequality and its determinants based on the development level of European countries. Distinct patterns emerge in factors such as mean years of schooling, remittances, and governance indicators, underscoring the importance of considering the unique economic and social contexts of countries when designing policies aimed at reducing income inequality.

Additionally, the research explores differences in the relationship between income inequality and its determinants during different crisis periods, such as the global financial crisis and the European sovereign debt crisis. Shifts in the impact of unemployment, education, gross fixed capital formation, and political variables highlight the dynamic nature of income distribution dynamics during economic downturns, emphasizing the need for context-sensitive policy interventions tailored to the unique challenges posed by each crisis.

The results of this research contribute to the ongoing discussions on reducing income inequality and promoting equitable economic growth in Europe. Such information can be used by decision-makers to develop policies and provide targeted interventions that alleviate income disparities and build an inclusive economy in the region. Strategic interventions such as improving governance quality, stimulating employment, and investing in education are identified as potential avenues for reducing income gaps and fostering inclusive economic growth.

 

EVALUATION OF WORK

The doctoral dissertation of the MSc candidate Kristina Velichkovska, with the title “Income Inequality Determinants – Developed vs. Developing Countries “, represents research in the area of Economics, with a focus on Development Economics, Comparative Economics, and Socioeconomic Policy Analysis. The preparation of this doctoral dissertation aims to investigate and analyze the determinants of income inequality across developed and developing countries, with the purpose of contributing to our understanding of the complex factors influencing income distribution dynamics and their implications for socio-economic development.

The overarching goal of this research is to provide a comprehensive examination of income inequality determinants, considering the unique economic, social, and political contexts of both developed and developing countries. By conducting rigorous empirical analysis and employing advanced econometric techniques, Kristina Velichkovska seeks to uncover the underlying drivers of income inequality disparities and identify key factors shaping income distribution patterns in different economic environments.

The expected scientific contribution of this doctoral dissertation is multifaceted. Firstly, by employing a multidisciplinary approach that integrates insights from economics, sociology, political science, and other relevant fields, the research aims to offer a holistic understanding of income inequality dynamics. Secondly, by comparing and contrasting income inequality determinants between developed and developing countries, this study offers valuable insights into the heterogeneity of income distribution dynamics. Understanding these differences is essential for designing tailored policy responses that address specific challenges faced by different European countries, thereby fostering inclusive growth and sustainable development across the continent. Finally, by providing evidence-based policy recommendations informed by the research findings, the doctoral dissertation aids in designing targeted interventions aimed at addressing root causes and promoting equitable outcomes. Furthermore, by uncovering the determinants of income inequality, this research contributes to broader discussions about social justice and fairness, catalyzing efforts to promote social equity and inclusion in European societies.

The successful realization of the objective of this research represented a significant challenge for the MSc candidate Kristina Velichkovska. It demanded meticulous attention to detail and exhaustive exploration. The scientific approach adopted for this dissertation is anchored in rigorous econometric analysis, providing a robust framework for examining the determinants of income inequality in developed and developing European countries.

Kristina's doctoral dissertation stands out for its comprehensive theoretical coverage, meticulous analysis, and concrete recommendations. It adopts an in-depth and analytical approach to both theoretical and empirical research in the field of economics. The relevance and reliability of the obtained results underscore the high level of objectivity maintained throughout the research process.

Furthermore, the verification of the originality and independence of the doctoral dissertation, titled "Income Inequality Determinants – Developed vs. Developing Countries," conducted by Kristina Velichkovska, was initiated through the System for Analysis and Detection of Plagiarism of the Ministry of Education and Science of the Republic of Macedonia, under the mentorship of Prof. Dr. Violeta Madzova. The outcome of the verification process reveals the originality of the doctoral research, with only a minimal percentage of matches found in the database, affirming the integrity and uniqueness of the dissertation's content.

The doctoral dissertation of the M.Sc. candidate Kristina Velichkovska, with the title “Income Inequality Determinants – Developed vs. Developing Countries”, according to the opinion of the Evaluation Commission, meets the basic conditions and standards for the preparation of a doctoral thesis.

 

FULFILLMENT OF LEGAL REQUIREMENTS FOR DEFENSE OF THE DISSERTATION

Before the defense of the doctoral thesis, the candidate published (as first author, in international scientific journals or one paper in a journal with an impact factor), the following peer-reviewed research papers:

[1]. Article “The Causal Relationship Between Income Inequality and Educational Attainment”, authors: “Kristina Velichkovska and Bojan Georgievski", published: Journal of the Institute of Economics - Skopje, Year. 24 No. 4/ 2022, 94-109, October 2022, Skopje, North Macedonia, DOI prefix: 10.55302/ED22244094v.

 [2]. Article “The Effect of Social Expenditures on Income Inequality in Post-Socialist and Capitalist Countries: A Panel Data Analysis”, authors: “Kristina Velichkovska”, published: Trends in Economics, Finance and Management Journal, 3(1), 50-64, June 2021, Skopje, North Macedonia, https://tefmj.ibupress.com/articles/the-effect-of-social-expenditures-on-income-inequality-in-post-socialist-and-capitalist-countries-a-panel-data-analysis

 

CONCLUSION

The Evaluation Commission has reviewed the doctoral dissertation of the candidate MSc Kristina Velichkovska, entitled "Income Inequalities Determinants: Developed vs Developing European Countries" and has emphasized the extreme satisfaction with the candidates’ overall work in this dissertation. The candidate has done an excellent job, thus deserving recommendation for its quality and significance, providing a comprehensive literature review, which demonstrates her solid background for understanding the factors that determine income inequality. Moreover, it can be easily noticed the extensive empirical contribution of this doctoral dissertation, since the candidate has provided sophisticated regression techniques and methods, ensuring the reliability and validity of the empirical findings. Further, it is important to highlight that the candidate had made a significant contribution to the topic by investigating on all determinants of income inequality, previously not included in any other research so far, which demonstrates the novelty of her research work.

The main scientific contributions of the candidate are several. Firstly, it significantly advances the field by offering a comprehensive examination of income inequality dynamics in Europe, particularly during periods of economic crisis. Unlike many previous studies, which often focus on individual determinants, this dissertation stands out for its holistic approach, considering determinants from multiple categories including macroeconomic, demographic, and political factors. This comprehensive analysis provides a nuanced understanding of the complex interplay between various determinants and their impact on income distribution. Additionally, this study is unique in its comparison of determinants between different crisis periods, shedding light on the dynamic nature of income inequality under varying economic conditions. This examination of combined impacts, especially during crisis periods, represents a significant advancement in the field. Furthermore, the dissertation introduces original research methodologies, including the use of the Least Squares Dummy Variable (LSDV) with interactions. While previous studies may have employed regression analysis, the inclusion of interaction terms in this study allows for the examination of the individual pure effect of each determinant, a methodological innovation not commonly seen in similar research. This novel approach enhances the robustness of the analysis and offers valuable insights into the specific contributions of different determinants to income inequality dynamics. Finally, the confirmation of the Kuznets curve hypothesis within the European context adds to the theoretical understanding of income distribution dynamics.

Assessing the originality of the idea behind this research reveals a commendable contribution to the field of income inequality studies. By integrating insights from economics, sociology, political science, and other relevant disciplines, the researcher demonstrates a novel approach that enriches the scholarly discourse on income distribution dynamics. Moreover, the comprehensive examination of income inequality across Europe, particularly during periods of economic crisis, showcases the innovative thinking behind this study. The interdisciplinary perspective adopted in this research not only enhances our understanding of income inequality but also sets a precedent for future studies seeking to explore complex social phenomena through an integrative lens.

Regarding the confirmation of the initial hypotheses, the research demonstrates a rigorous analysis of the proposed hypotheses, revealing valuable insights into income inequality dynamics. While some hypotheses may have been confirmed as anticipated, the study also unveils unexpected findings that challenge existing assumptions and provoke further inquiry. By critically evaluating the initial hypotheses against empirical evidence, the study contributes to a more nuanced understanding of the factors driving income inequality in Europe.

The scope and limitations are multifaceted and require careful consideration. While the methodology this study employs is robust, it may not fully encapsulate the long-term dynamics and structural changes within economies over time. Additionally, the aggregate data used might hide the individual experiences of income distribution, while the omission of some determinants and contextual factors may limit the generalizability of the findings. These limitations imply that the findings of this study should be interpreted with some degree of caution.

Possible further research could involve delving deeper into specific aspects such as the role of technological advancements, regional disparities, and the impact of social policies on income inequality dynamics in Europe. By focusing on these nuanced factors, future studies could provide a more comprehensive understanding of the complex interplay between various determinants and their effects on income distribution. Additionally, longitudinal studies spanning a broader timeframe could capture long-term trends and structural shifts in income distribution dynamics, offering insights into the underlying mechanisms driving income disparities over time. Moreover, comparative analyses across different regions or global contexts could elucidate the universal applicability of the identified determinants and their impacts on income inequality. While this study serves as a foundational step, future research endeavors could build upon its findings to develop more comprehensive frameworks for addressing income distribution challenges and fostering inclusive growth in Europe and beyond.

 

 

SUGGESTION

On the basis of the content, evaluation, and research made in the doctoral dissertation entitled “Income Inequality Determinants – Developed vs. Developing Countries”, the Commission for Evaluation and Defense of the Doctoral Dissertation written by the candidate M.Sc. Kristina Velichkovska positively evaluated the doctoral dissertation and suggested to the Teaching–Academic Council of the Faculty of Economics and Administrative Sciences:

-  To accept the Report for evaluation of the Doctoral dissertation under the name “Income Inequality Determinants – Developed vs. Developing Countries”, submitted by the candidate M.Sc. Kristina Velichkovska; and

- To determine a date for the public defense of the Doctoral dissertation.

 

Skopje, 10.04.2024

                                                                                    COMMISSION

1. Prof. Dr. Snezana Bilic, President of the comission

2. Prof. Dr. Violeta Madzova, mentor

3. Assoc. Prof. Dr. Luljeta Sadiku, member

4. Assoc. Prof. Dr. Liza Alili Sulejmani, member

5. Assoc. Prof. Dr. Besime Ziberi, member