Social Macroeconomic Imbalance Procedure (MIP) Indicators: Do They Matter?

Abstract

The European Union’s (EU’s) Macroeconomic Imbalance Procedure (MIP) increasingly incorporates social indicators alongside traditional economic metrics, yet the empirical relationship between these dimensions remains underexplored. This study investigates whether social outcomes captured by the MIP scoreboard function as independent early-warning signals or merely reflect underlying macroeconomic conditions already monitored through non-social indicators. Analysing panel data for all 27 EU member states over 2001–2023, we employ LASSO regression for variable selection, two-stage fixed-effects estimation, and random forest analysis, validating results through Leave-One-Country-Out Cross-Validation. The findings reveal a fundamental dichotomy. Unemployment is robustly predicted by macro-financial variables, particularly non-performing loans and nominal unit labour costs, a result consistent across all three methods. In contrast, post-transfer poverty rates prove unpredictable from macroeconomic conditions regardless of model specification, suggesting that redistribution outcomes are decoupled from macro-financial variables and may be influenced by national tax-and-benefit systems not captured in the MIP scoreboard. Labour force participation similarly shows no significant association with any non-social indicator. We propose a dual-track reform: streamlining the MIP to focus on macroeconomic surveillance while establishing a parallel Social Convergence Framework for redistribution policy monitoring. Macroeconomic stability remains necessary for social progress across EU member states, but it does not account for poverty outcomes that appear linked to national social policies beyond the MIP’s scope.