Navigating Europe’s Socio-Economic Crisis
Robin Maialeh
Editor
Navigating Europe’s
Socio-Economic Crisis
The Impact of Inflation, the Energy Crisis,
and the Conflict in Ukraine on the Czech Republic
and Beyond
Editor
Robin Maialeh
RILSA
Prague, Czech Republic
This study was partly supported by the Ministry of Labour and Social Affairs of
the Czech Republic IP70203
ISBN 978-3-031-44872-0 ISBN 978-3-031-44873-7 (eBook)
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Contents
1 Introduction
to the Current Challenges 1
Robin Maialeh
2 A
Panel VAR Granger Causality Analysis of Wages and
Labour Productivity: Evidence from Czech Regions 13
Umut Ünal and Robin Maialeh
Introduction 14
Literature Review 19
Data and Methodology 21
Results 22
Conclusion 26
References 28
3 Convergence
in the Labour Market: Evidence from the
Czech Republic 31
Umut Ünal and Robin Maialeh
Introduction 32
Literature Review 35
Data and Methodology 38
Results 40
Conclusion 44
References 46
v
vi
Contents
4 Migration
and the Labour Market of the Czech Republic 49
Bohdana Kurylo
Introduction 50
Overview of the Migrant Population in the Czech Republic 54
Determinants of the Location Choices of Ukrainian Refugees and
EU Dispersal Policies 58
Ethnic Networks 58
Unemployment Rates and the Availability of Job Places 61
Dispersal Policies: Previous Experience of EU Member States 63
Labour Market Outcomes of Immigrants in the Czech Republic 66
Conclusion and Policy Recommendations 74
Appendix 76
References 76
5 Inflation
Inequality: Drivers and Composition in the Czech
Republic and Beyond 81
Davit Adunts and Robin Maialeh
Introduction 82
The International Context of Inflation Inequality 85
Cross-Country Comparisons of Inflation Mitigation Policies 94
The Case of the Czech Republic 97
Results and Discussion 102
Conclusion 106
References 110
6 Weathering
the Storm: The Socioeconomic Impact of the
Energy Crisis113
Filip Mandys
Introduction 114
Literature Review 118
Data 122
Dataset Construction 122
Household Expenditure Data 123
Price Data 127
Methodology 129
Contents vii
Results and Discussion 132
Energy Inflation in the Czech Republic 132
Energy Inflation in Europe 139
Conclusion 145
References 148
7 Policy
Recommendations and Concluding Remarks153
Robin Maialeh
References 168
Index171
Notes on Contributors
Davit Adunts is a senior researcher at the Research Department of
Migration and International Labour Studies at the Institute for
Employment Research (IAB), the Research Institute of the Federal
Employment Agency in Nuremberg, Germany. Prior to joining IAB, Davit
worked as a junior researcher at the Research Institute for Labour and
Social Affairs (RILSA). Since 2015, he has been a PhD candidate at the
Center for Economic Research and Graduate Education–Economics
Institute (CERGE-EI), a joint workplace of Charles University and the
Economics Institute of the Czech Academy of Sciences. His research
interests lie at the intersection of applied econometrics, the economics of
migration, and the economics of education. His research focuses on
migration selectivity and sorting, refugee labour market integration, and
the impacts of migration opportunities on gender inequalities.
Bohdana Kurylo is a postdoctoral researcher at the Research Centre for
Education and the Labour Market (ROA) at Maastricht University. Prior
to joining ROA, Bohdana worked as a junior researcher at the Research
Institute for Labour and Social Affairs (RILSA). From 2016, she was a
PhD candidate at the Center for Economic Research and Graduate
Education–Economics Institute (CERGE-EI), a joint workplace of
Charles University and the Economics Institute of the Czech Academy of
Sciences. Her research areas are empirical labour and education economics, with a specific interest in the impacts of schools and teachers on student outcomes, and educational inequalities between different groups of
students.
ix
x
NOTES ON CONTRIBUTORS
Robin Maialeh is an economist and social scientist who holds a PhD
from the Prague University of Economics and Business. He is working as
the Director of the Research Institute for Labour and Social Affairs
(RILSA) in Prague, which conducts independent socioeconomic research
in close cooperation with its founding organisation the Ministry of Labour
and Social Affairs of the Czech Republic. Prior to his appointment to
RILSA, Robin Maialeh was a Vice-President at Unicorn and an Assistant
Professor of Economics at the Czech Technical University in Prague and
the University of Chemistry and Technology in Prague. He has also held
visiting research positions at Princeton University and the University of
California, Berkeley. His research focuses on socioeconomic inequalities,
the political economy, and the methodology of science.
Filip Mandys is working as a senior researcher at the Research Institute
for Labour and Social Affairs (RILSA) in Prague. Previously, he worked as
a research consultant in the Research & Market Analysis (RMA) division
of the European Investment Fund (EIF) in Luxembourg. He holds a PhD
in Economics from the University of Surrey, United Kingdom, as well as
an MSc in International Economics, Finance, and Development and a BSc
in Economics and Finance from the same university. His research interests
include energy and environmental economics, labour economics, and
applied econometrics.
Umut Ünal holds a PhD in Economics from Florida International
University (2012). He has a diverse academic career, including roles as a
lecturer at Florida International University, faculty at Turgut Ozal
University, adjunct faculty at Middle East Technical University, and a visiting scholar at Philipps Universitat Marburg. He holds the position of
Head of Macroeconomic Analyses department in the Research Institute
for Labour and Social Affairs (RILSA). His research endeavours are concentrated in the field of macroeconomics, with a central focus on empirical
applications. His papers have appeared in well-known international journals such as Regional Studies, Kyklos, and Empirical Economics.
List of Figures
Fig. 3.1
Fig. 3.2
Fig. 4.1
Fig. 4.2
Fig. 4.3
Fig. 4.4
Fig. 4.5
Final labour productivity convergence clubs across the Czech
Republic42
Final real wages convergence clubs across the Czech Republic
42
Foreign nationals in the Czech Republic, 2005–2022. (Note:
Data on the number of foreign nationals in the Czech
Republic in 2022 is available only as of 30 September 2022.
The latest data on the population is available as of 30 June
2022; hence, the share of foreign nationals in the figure is
reported as of this date)
55
Annual migration flows in the Czech Republic, 2004–2021
56
Main countries of origin: Shares of immigrants in the Czech
Republic, 2012–2022. (Note: The number of foreign nationals
in the Czech Republic for 2022 was reported only as of 30
September 2022)
57
Regional distribution (See the application of Münich and
Hrendash (2022) on the dynamics of the regional distribution
of Ukrainian war refugees) of Ukrainian war refugees. (Note:
The visualisation is based on data available as of 31 March
2023 obtained from the Ministry of the Interior of the Czech
Republic (2022b))
58
Relationship between the numbers of Ukrainian immigrants
and Ukrainian refugees (as of 31 December 2021). (Note: The
visualisation is based on data obtained from the Ministry of
the Interior of the Czech Republic (2022b))
59
xi
xii
List of Figures
Fig. 4.6
The distribution of available job positions across districts.
(Notes: Based on data obtained from the Ministry of Labour
and Social Affairs (2022) and the Ministry of the Interior of
the Czech Republic (2022b). Each point on the graph on the
right corresponds to a district. We excluded the three districts
with the largest numbers of available job positions per 1000
inhabitants (15–64 years), i.e. Tachov, Mladá Boleslav and
Český Krumlov from the right-hand figure)
63
Fig. 4.7Occupational skill levels of immigrants, as of 31 December 2021 67
Fig. 4.8
Wage development across immigrant groups, by country of
citizenship, 2012–2021
68
Fig. 4.9
Blinder-Oaxaca Wage Gap decomposition across the wage
distribution spectrum. (Note: The figures above reflect the
immigrant-native wage gap according to deciles after
controlling for an extensive set of observable characteristics
including gender, education, years of experience, size of the
firm, marital status, number of children, occupation, level of
urbanisation of the region and year-fixed effects. The results
were weighted applying probability weights)
70
Fig. 4.10 Gender composition of the Ukrainian diaspora in the Czech
Republic. (Note: Based on data obtained from the Czech
Statistical Office (2021))
76
Fig. 5.1Overall shares of expenditure. (Source: Own calculation based
on data from the Czech Statistical Office)
100
Fig. 5.2
Shares of expenditure by income group, 2021. (Source: Own
calculation based on data from the Czech Statistical Office)
102
Fig. 5.3
Shares of expenditure by family characteristics, 2020.
(Source: Own calculation based on data from the Czech
Statistical Office)
103
Fig. 5.4
Year-on-year changes in the consumer price index by
household income quantiles and family characteristics,
December 2022. (Source: Own calculation based on data from
the Czech Statistical Office)
103
Fig. 5.5
Contributions to the year-on-year change in the CPI from the
considered product categories for five population subgroups
based on income quantiles, December 2022. (Source: Own
calculation based on data from the Czech Statistical Office)
104
Fig. 5.6
Contributions to the year-on-year change in the CPI from the
considered product categories for the defined population
subgroups based on family characteristics, April 2022.
(Source: Own calculation based on data from the Czech
Statistical Office)
105
List of Figures Fig. 5.7
Fig. 6.1
Fig. 6.2
Fig. 6.3
Fig. 6.4
Fig. 6.5
Fig. 6.6
Fig. 6.7
Fig. 6.8
Fig. 6.9
Fig. 6.10
Fig. 6.11
Fig. 6.12
Fig. 6.13
xiii
Loss of purchasing power over the last 12 months (from April
2021 to April 2022) by income groups and family
characteristics. (Source: Own calculation based on data from
the Czech Statistical Office)
106
The share of energy expenditure in total household
expenditure, comparing 15 OECD countries with the highest
energy costs share in 2021. (Source: The data was obtained
from the OECD, namely the Final consumption expenditure
of households)
115
Disaggregated average household general expenditure for all
households in the Czech Republic, between 2017 and 2021
124
Disaggregated average household energy expenditure for all
households in the Czech Republic, between 2017 and 2021
126
Development of the monthly price indices of the four largest
goods and services categories in the Czech Republic
(2017–2023)—the price of “housing, water, and energy”,
“food and non-alcoholic beverages”, “transport”, and
“recreation and culture”
127
Development of the monthly disaggregated energy price
indices in the Czech Republic (2017–2023)—prices of
electricity, gas, solid fuel, liquid fuel, heat, and automobile fuel 128
Percentage annual increase in overall prices by consumer
socioeconomic group between February 2022 and February
2023132
Percentage annual increase in energy prices by consumer
socioeconomic group between February 2022 and 2023
133
Annual financial losses by consumer socioeconomic group
caused by overall inflation, in Czech crowns (February 2022 to
February 2023)
135
Annual financial losses by consumer socioeconomic group
caused by energy inflation, in Czech crowns (February 2022
to February 2023)
136
Financial loss as a share of income across the socioeconomic
groups due to overall inflation, between February 2022 and
February 2023
137
Financial losses as a share of income across socioeconomic
groups due to energy inflation, between February 2022 and
February 2023
138
The twenty European countries with the highest annual
general inflation rate between February 2022 and
February 2023
140
The twenty European countries with the highest annual energy
inflation rates between February 2022 and February 2023
141
xiv
List of Figures
Fig. 6.14
Fig. 6.15
The twenty European countries with the highest household
financial losses from overall inflation as a share of income,
between February 2022 and February 2023
The twenty European countries with the highest household
financial losses from energy inflation as a share of income,
between February 2022 and February 2023
143
144
List of Tables
Table 2.1
Table 2.2
Table 2.3
Table 3.1
Table 3.2
Table 3.3
Table 4.1
Table 5.1
Table 6.1
Table 6.2
Pesaran (2015) weak cross-section dependence test results
Panel unit root test results (Fisher PP)
Panel—granger causality test
Logt test results for all regions
Initial convergence club specification
Testing for club merging for labour productivity
Detailed Blinder-Oaxaca decomposition: The effects of
certain observable characteristics
National inflation mitigation policies
Annual average per capita household energy expenditure,
Czech Republic (2018–2021)
Types of energy policies aimed at mitigating the energy crisis
effects (June 2023)
22
23
24
41
41
42
72
95
125
147
xv
CHAPTER 1
Introduction to the Current Challenges
Robin Maialeh
Abstract In the dynamic landscape of the global economy, rigorous
research that addresses key socioeconomic issues plays a pivotal role in
terms of shaping equitable societies. This book explores several critical
aspects of the economy of the Czech Republic, shedding light on topics
such as the relationship between wages and productivity, the integration of
immigrant workers and the distributional effects of inflation. These chapters, characterised by their thorough analysis and methodological precision, both contribute to the academic discourse and provide valuable
insight for policymakers. The Czech Republic’s unique economic challenges, regional disparities and labour market dynamics provide fertile
ground for exploration. The chapters reveal the intricate connections
between wage dynamics, productivity and regional disparities, while
addressing immigrant labour market integration and the impacts of inflation on different socioeconomic groups. By offering nuanced insights and
employing advanced methodologies, this book advances the overall level
of economic understanding, informs policy decisions and paves the way
R. Maialeh (*)
RILSA, Prague, Czech Republic
e-mail: robin.maialeh@rilsa.cz
1
,
2
R. MAIALEH
towards a more sustainable, inclusive and prosperous future for the Czech
Republic and beyond.
Keywords Socioeconomic research • Labour market • Inflation •
Public policy • Distributional effects
In the ever-evolving landscape of the global economy, where complexities
and disparities abound, rigorous research into pivotal topics plays a commanding role in terms of shaping more equitable and just societies. This
book considers a range of critical issues that lie at the heart of socioeconomic research. The chapters featured herein, each of which embodies
meticulous analysis and methodological rigour, shed light on fundamental
aspects of the economy of the Czech Republic. By exploring the intricacies
of the relationship between wages and productivity, the distributional
effects of inflation and the labour market integration of immigrants, this
collection both advances the academic discourse and provides indispensable insight for policymakers and stakeholders alike.
In recent years, the Czech Republic has provided fertile ground for
economic transformation and has been faced with formidable challenges,
which has prompted both scholars and policymakers to consider the intricacies of the country’s economic dynamics. The Czech Republic comprises distinct regions, each with its own socioeconomic characteristics and
potential for growth. This heterogeneity provides an ideal “laboratory”
for the investigation of the factors that contribute to regional disparities
and the dynamics that underpin the convergence or divergence of economic performance across regions. Secondly, the prevalence of relatively
low wages in the Czech Republic serves as a crucial point of interest for
scholars and policymakers alike. The country’s labour market landscape is
characterised by a competitive environment in which low wages have the
potential, as the archetypal textbook conclusion suggests, to attract foreign investment and stimulate employment. However, it should be noted
that such conclusions are conditioned to numerous aspects and generate
mixed effects. Low wages may also push the unemployment rate below
sustainable levels. A low unemployment rate may, in turn, then serve as a
balancing factor that acts to support already weaken consumer demand
caused by low wage levels.
1 INTRODUCTION TO THE CURRENT CHALLENGES
3
In addition, the low-wage scenario also raises questions concerning the
adequacy of remuneration for workers and the negative impact on standards of living and, potentially, income inequality since the income composition of the top earners is usually dominated by capital rather than
labour incomes. Moreover, the examination of the role of policies and
labour market institutions in terms of determining wage levels becomes
paramount in the quest to shape a sustainable and inclusive economy.
Furthermore, the juxtaposition of regional economic disparities and low
wages leads to the uncovering of several intriguing connections between
these factors. How do regional disparities influence wage levels, and vice
versa? Does the prevalence of low wages in certain regions exacerbate disparities, or does it present an opportunity for economic convergence?
Unravelling these interrelationships allows for a nuanced understanding of
the broader economic landscape and the discovery of potential pathways
for fostering equitable and robust economic growth.
In addition to the structural differences in regional economic development, the Czech Republic’s recent experience with a substantial influx of
war refugees from Ukraine and the challenges posed by rampant inflation
have further solidified its position as an exemplary case for investigation.
The significant influx of refugees has introduced complex dynamics into
the Czech Republic’s social and economic fabric. The integration of these
refugees into the labour market and society at large presents unique challenges and opportunities. The investigation of how the arrival of war refugees impacts the labour market, wage dynamics and overall economic
performance has the potential to yield valuable insight for policymakers
facing similar situations globally. Forming an understanding of the potential impacts on the labour supply, skills transferability and human capital
development is vital in terms of designing targeted policies that promote
inclusive growth and social cohesion.
Moreover, the issue of rampant inflation has emerged as a pressing concern for the Czech Republic, and the detailed study of its impacts on
society is crucial. High inflation rates potentially erode purchasing power,
exacerbate income disparities and impact wage bargaining dynamics. The
analysis of inflationary pressures in the context of incomes and regional
disparities assists policymakers in terms of devising measures aimed at protecting vulnerable groups and maintaining economic stability. Moreover,
the exploration of the link between inflation and labour market outcomes
sheds light on the efficiency of monetary policies and their implications for
employment and wage levels.
4
R. MAIALEH
The combination of the shocks that have severely affected the Czech
Republic over recent years provides a unique opportunity to set the background for examining the interconnectedness of these phenomena. The
integration of war refugees into the labour market and society, coupled
with the impact of inflation on different social groups, and regional labour
market disparities, presents a multifaceted economic landscape. Via the
exploration of these intricate dynamics, researchers are able to provide
evidence-based recommendations for policymakers in terms of fostering
social cohesion and sustainable economic growth in the face of complex
and interconnected challenges. As we embark on this scholarly journey,
the various chapters in this book offer a testament to the enduring pursuit
of knowledge in the field of economics and policy research. Each contribution represents a step forward with concern to enriching the understanding of the key economic phenomena that shape the Czech Republic’s
economic landscape. The rigorous methodologies employed in these
chapters underscore the commitment to empirical precision and intellectual rigour and converge at the vanguard of contemporary economic
research by illuminating critical themes that resonate with the host of
complexities of the global economy. Through diligent inquiry and methodological precision, the book provides a major contribution to the understanding of the economic dynamics of the Czech Republic. As we navigate
through the chapters that lie ahead, the insight gleaned from this collection will serve to foster a deeper appreciation of the interplay of economic
forces that will pave the way towards a more sustainable, inclusive and
prosperous future for the Czech Republic and beyond.
The second chapter proposes that the intricate relationship between
real wages and labour productivity lies at the heart of economic performance, and includes a thorough analysis of the causal dynamics that
underpin this pivotal relationship in the regional context of the Czech
Republic. Leveraging an extensive panel dataset spanning the period 2000
to 2021, the study comprises a comprehensive investigation into the intertwined trajectories of real wages and labour productivity. Aimed at unravelling this complex interplay, the chapter applies the panel vector
autoregression (VAR) Granger causality test, which is widely recognised as
offering an effective methodology for such investigations. In addition, the
research employs the generalised method of moments (GMM) methodology, which is known for its capacity to address diverse econometric challenges, including endogeneity issues. The results provided by the rigorous
analysis shed light on the reciprocal relationship between real wages and
1 INTRODUCTION TO THE CURRENT CHALLENGES
5
labour productivity across the various regions of the Czech Republic. The
identification of this interdependence, which suggests that changes in real
wages have the potential to influence labour productivity, while shifts in
labour productivity concurrently impact real wages, is of profound significance. These findings reveal the intrinsic nexus that binds these two key
economic indicators, which has ramifications for both policymakers and
stakeholders.
As we progress through this scholarly endeavour, the significance of
understanding the causal relationship between real wages and labour productivity becomes evident. The chapter provides important insight into
the determinants that shape economic performance within the regional
landscape of the Czech Republic, and the findings pave the way for the
implementation of informed policy interventions that optimise the interplay between real wages and labour productivity and foster sustainable
economic growth and social well-being. Policymakers should leverage
these research findings so as to design targeted strategies that enhance
labour productivity, thereby elevating real wages and promoting the economic prosperity of the nation as a whole. Moreover, the application of
advanced econometric methodologies such as the panel VAR Granger
causality test and GMM makes a significant contribution to the application
of this methodological repertoire and bolsters the credibility and robustness of the economic research. By employing these sophisticated techniques, this chapter addresses potential endogeneity challenges and serves
to enhance the level of accuracy concerning the causal relationship between
real wages and labour productivity.
Continuing with the issue of wages and productivity and with concern
specifically to the realm of regional economic dynamics, forming an understanding of labour productivity and real wages convergence patterns is of
paramount importance. The third chapter undertakes a rigorous analysis
aimed at investigating and dissecting the diverse convergence patterns
across the fourteen distinct regions of the Czech Republic over the period
2000 to 2021. Employing the clustering algorithm, this chapter ventures
into uncharted territory by offering novel insight via the modelling of the
variables in a non-linear manner, thus accommodating both heterogeneity
and transitional dynamics at the regional level. The exploration of the
outcomes provides valuable information on the nuanced dynamics that
underlie labour productivity and real wages and, further, serves to shape
our comprehension of the diverse economic performance and wage levels
that are evident across the regions. In the absence of conclusive evidence
6
R. MAIALEH
in support of overall convergence, the identification of two (three) sub-­
convergence and one non-convergence group for labour productivity (real
wages) revealed the varied trajectories and distinct factors that influence
regional economic growth and wage distribution in the Czech Republic.
The findings should serve as a call to action for policymakers and
researchers to meticulously analyse and comprehend the intricate convergence patterns that underpin regional economic dynamics. By gaining a
comprehensive understanding of the unique factors and influences that
shape labour productivity and real wages in each region, targeted strategies can be devised aimed at addressing regional disparities, fostering
inclusive economic growth and ensuring an equitable wage distribution
across the Czech Republic. The analysis of labour productivity and real
wages convergence patterns stands as a cornerstone in the quest for equitable regional economic development. The understanding of the presence
of sub-convergence and non-convergence groups helps to unravel the
complexity of regional disparities and dynamics, thus presenting new
opportunities for policymakers to tailor intervention measures that address
the specific needs and challenges faced by different regions. The insight
offered by this chapter enriches our understanding of the heterogeneous
nature of regional dynamics and serves as a crucial reference point for
guiding policymakers and researchers towards the design of informed
strategies that promote economic growth, mitigate regional disparities
and bolster an equitable wage distribution system.
Continuing with the theme of the Czech labour market, the immigrant
labour market integration process comprises a complex and critical area of
inquiry in an increasingly interconnected global economy. The fourth
chapter provides an incisive overview of the labour market integration of
immigrants in the Czech Republic employing comprehensive data
obtained from the European Union—Statistics on Income and Living
Conditions (EU-SILC) survey over the period 2006 to 2021. As the
nexus between immigrant-native wage differences and the effectiveness of
immigration and integration policies becomes ever more pertinent, this
chapter presents a nuanced exploration of this relationship and offers valuable insight for policymakers. Moreover, it explores the various factors
that shape the location choices of Ukrainian war refugees in the Czech
Republic, including the influence of ethnic networks and employment
prospects, that contribute towards the unequal distribution of refugees.
Employing the Blinder-Oaxaca decomposition for unconditional quantile
regressions method, the chapter rigorously quantifies wage differences
1 INTRODUCTION TO THE CURRENT CHALLENGES
7
across the entire wage distribution spectrum and provides crucial insight
into the economic realities faced by immigrants.
The analysis reveals that immigrants from Eastern and Southern
Europe, on average, earn lower wages than native Czechs. Notably, low-­
earner immigrants face a more considerable wage disadvantage than their
high-earning counterparts. These disparities underscore the urgency of
investigating the determinants responsible for the immigrant-native wage
gap across the entire wage distribution spectrum. The chapter reveals the
myriad unobservable factors that comprise the key determinants in terms
of shaping wage disparities, thus enriching our understanding of the multifaceted interplay of diverse variables. Education and experience play pivotal roles in determining wage disparities between immigrants and natives.
Immigrants often encounter lower returns on their education and experience, which can be attributed to the imperfect transferability of skills, challenges in terms of the recognition of foreign educational qualifications,
and lower returns on foreign education. This finding underscores the
necessity for the implementation of targeted policies that address the specific hurdles faced by immigrant workers concerning in particular ensuring
equitable access to opportunities and resources and facilitating the seamless integration of immigrants into the labour market.
The findings of the fourth chapter resonate as a clarion call for the
design and implementation of more effective integration and equal treatment policies aimed at narrowing the immigrant-native wage gap. By
acknowledging the complexities of labour market integration, policymakers will be better able to craft informed strategies that foster social cohesion and promote inclusive growth by leveraging the potential of immigrant
workers for the collective benefit of society and the economy. The knowledge provided by this chapter offers a valuable lens through which to
comprehend the immigrant labour market integration dynamics at work
in the Czech Republic. The contribution of this chapter extends beyond
mere data analysis; it serves as a beacon for guiding policymakers towards
designing evidence-based intervention measures that prioritise inclusive
economic growth and social cohesion. By placing immigrant labour market integration at the heart of policymaking, we can collectively create a
more harmonious and prosperous society that nurtures the diverse talents
and contributions of all individuals, thus fostering an environment of
equal opportunities and shared prosperity.
Currently high levels of inflation comprise a further important issue for
the labour market. As the global economy experiences bouts of
8
R. MAIALEH
inflationary pressures, the exploration of the distributional effects of this
phenomenon is imperative in terms of forming an understanding of the
implications for different socioeconomic groups. The fifth chapter presents a comprehensive analysis of the distributional effects of currently high
inflation rates, focusing specifically on the investigation of studies that
have addressed inflation in the European context. Drawing upon innovative methodologies that integrate microeconomic surveys with national
accounts and employ panel quantile regression with fixed effects, the
chapter unravels the intricate relationship between inflation and income
inequality. The findings highlight that higher inflation rates exacerbate
income inequality, particularly in regions characterised by lower initial
income inequality. Moreover, the chapter explores the complex interplay
between inflation and well-being by disentangling the contributions of
profits, wages and import prices to inflation dynamics within countries.
In the context of the Czech Republic, the chapter adopts a meticulous
approach employing data obtained from the Czech Household Budget
Survey and the Consumer Price Index to create consumer price indices for
various population subgroups. This thorough analysis allows for a nuanced
understanding of the distributional impact of inflation on different segments of society, particularly those whose budgets are most affected.
Notably, the chapter emphasises that subgroup-specific inflation rates
align closely with that of the inflation rate for the non-elderly population,
with the exception of single-parent households, which experienced a
higher inflation rate in 2022 than the other subgroups. Although this difference was reasonably modest, the findings are significant in view of the
potential negative implications for the well-being of single-parent households. Importantly, the fifth chapter sheds light on the disproportionate
burden borne by low-income and single-parent households in terms of
inflationary costs related to essential expenses such as housing, water, electricity, gas and other fuels. While all households are facing the impact of
rising living costs, the analysis indicates that single-parent and low-income
households are particularly vulnerable to the inflationary pressures that
arise from these essential items. The stark contrast in terms of the inflation
burden between single-parent and two-parent households, especially with
regard to housing, water, electricity, gas and other fuel costs, reveals the
heightened susceptibility of single-parent households to the adverse effects
of inflation
The disparities identified in the distributional effects of inflation signal
the pressing need for the introduction of targeted policy intervention
1 INTRODUCTION TO THE CURRENT CHALLENGES
9
measures that specifically address the challenges faced by vulnerable households. In particular, the recent increases in electricity and gas prices underscore the urgency of providing government support aimed at mitigating
the adverse impacts on single-parent households. By prioritising support
for single-parent and low-income households, policymakers will contribute towards fostering social equity and stability, alleviating the burden of
rising living costs, and promoting a more inclusive economic recovery.
The insight gained from this analysis serves as a critical reference point for
informed policymaking that aims to mitigate the adverse consequences of
inflation on the most susceptible segments of society and support the creation of a more equitable economic landscape. The results presented in
this chapter contribute to forming a more complete understanding of the
complex interplay between inflation and income inequality, thus paving
the way for a more resilient and just economic future for all.
Finally, European countries have recently found themselves grappling
with a pervasive surge in inflation, exacerbated especially by the rapid escalation in energy prices. The Czech Republic has been hit particularly hard
by the ongoing energy crisis. The implications of such inflationary pressures warrant meticulous investigation. Thus, the sixth chapter explores
the phenomenon of general and energy inflation in the Czech Republic.
Employing data obtained from highly respected sources including the
Czech Statistical Office, Eurostat, ONS and OECD, the chapter endeavours to explore the profound economic ramifications of the crisis, identifies those socioeconomic groups that have been most severely affected and
suggests strategies for targeted governmental support aimed at mitigating
the losses incurred.
Of all the realms of economic dynamics, inflation represents one of the
pivotal indicators; it significantly influences the financial well-being of
households and shapes overall economic performance. The sixth chapter
attempts to explain the specific drivers of inflationary pressures focusing
particularly on energy prices, the rapid increase in which has exacerbated
the already precarious economic situation. Drawing upon a comprehensive dataset spanning the period February 2022 to 2023, the chapter
quantifies the toll inflicted by general inflation and the exclusive impact of
energy inflation on the average Czech household. The alarming findings
indicate that households have suffered a staggering loss of 12.2% of their
annual net income due to overall inflation and an additional 3.5% due to
energy inflation alone. These figures both underscore the gravity of the
crisis and underline the urgent need for the introduction of effective policy
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R. MAIALEH
intervention measures aimed at alleviating the burdens borne by vulnerable segments of society.
Moreover, the chapter strives to identify the distinct socioeconomic
groups that have borne the brunt of energy-crisis-driven inflation. Through
rigorous analysis, pensioners, the poorest families in society, single parents
and households located in small municipalities were identified as the most
vulnerable group and those that experienced the most substantial financial
losses. The implications of these findings are profound and signal the need
for targeted government support that prioritises the addressing of the
unique challenges faced by these groups. By devising measures that align
with the specific needs of these socioeconomic segments, policymakers can
contribute towards fostering social cohesion, reducing inequalities and
safeguarding the well-being of the most vulnerable members of society.
Aimed at contextualising the Czech Republic’s position in the wider
European landscape, the chapter further compares the nation’s inflationary experience with that of other European countries. The identification
of the Czech Republic as the fourth most affected country in Europe
emphasises the gravity of the crisis and underscores the shared urgency for
cohesive, collaborative solutions at the regional level. The experience of
other European nations provides valuable information for the development of policy measures that effectively address inflationary pressures and
their consequences on the overall economic stability and social welfare of
the region.
In summary, in the context of today’s rapidly evolving socioeconomic
landscape, the three pivotal topics explored in this compendium—the relationship between wages and productivity, the influx of immigrants and the
distributional effects and decomposition of inflation—have emerged as
fundamental issues for economic research and policy decision-making.
These interconnected themes have the potential to reshape our understanding of economic dynamics, labour market efficiency and income distribution in the face of evolving global challenges. The nexus between
wages and productivity has a number of critical implications for policymakers who wish to encourage economic growth and increase productivity levels. A comprehensive understanding of the labour market integration
of immigrants is imperative in terms of effectively harnessing their economic potential. The examination of the distributional effects that arise
from inflationary pressures is essential in terms of devising equitable policies that act to reduce socioeconomic disparities and ensure macroeconomic stability. As we progress through the diverse chapters of the book,
1 INTRODUCTION TO THE CURRENT CHALLENGES
11
the intrinsic value of these topics for current socioeconomic research
becomes increasingly apparent. The findings and methodologies presented
in this compendium contribute to the shared knowledge base that guides
policymakers and researchers in terms of formulating evidence-based policies, fostering inclusive growth and mitigating economic imbalances. The
insight provided resonates with the complexities of the contemporary
global economy as we strive to build a sustainable, equitable and resilient
future for the Czech Republic and beyond.