Social cohesion as a determinant of economic activity amidst the crises of the 21st century in EU countries

In this paper, we investigate the potential impact of social cohesion on the level of economic activity in European Union countries for the 2001-2022 period. Following a macroeconomic approach, we consider the effect of inequality on economic activity using income per capita, competitiveness, public debt and deficit and monetary policy as control variables. For the whole period under investigation, we observe that all but one (competitiveness) explanatory variables are statistically significant, also bearing the expected sign. Particularly interesting, though, is the strong and positive relationship between inequality and unemployment. Even more interesting though is that we observe a change in the effect of inequality on unemployment before and after the 2007-2009 crisis when during that second period inequality became the most significant determinant of unemployment, while in the pre-crisis period it was insignificant. Our approach supports the rekindled interest placed on inequality as an important factor affecting social welfare after the great recession.