Abstract
AbstractIn this article, we study how social expenditure is related to poverty, income inequality and GDP growth. Our main contribution is to disentangle these relationships by the following social expenditure schemes: 1) “old age and survivors”, 2) “incapacity”, 3) “health”, 4) “family”, 5) “unemployment and active labour market policies” and 6) “housing and others”. For this purpose, we employ OLS and 2SLS regression models using a panel data set for 22 Member States of the European Union from 1990 until 2015. We find total public social expenditure to be negatively related to poverty and inequality, but not related to GDP growth. The results vary substantially between the different social expenditure schemes, which makes more accurate targeting possible.
Highlights
In the light of the work of Piketty (2014), and given further impetus by the rise of populist movements (Muis and Immerzeel, 2017), there has been a resurgence in the public and academic debate on income and wealth inequality (Connor et al, 2019)
We find total public social expenditure to be negatively related to poverty and inequality, but not related to GDP growth
We study how different social expenditure schemes are related to final values of the poverty rate and the Gini coefficient for income inequality, as well as to GDP growth
Summary
In the light of the work of Piketty (2014), and given further impetus by the rise of populist movements (Muis and Immerzeel, 2017), there has been a resurgence in the public and academic debate on income and wealth inequality We investigate how social expenditure at the aggregated level is related to poverty, inequality and GDP growth This analysis examines whether reducing poverty and inequality through total public social expenditure comes at the expense of economic growth. We study how these relationships between “social expenditure” and “poverty, inequality and GDP growth” differ for social expenditure on 1) “old age and survivors”, 2) “incapacity”, 3) “health”, 4) “family”, 5) “unemployment and active labour market policies” (ALMPs), and 6) “housing and others”. This analysis shows the importance of the different expenditure types for reducing poverty and inequality and stimulating GDP growth.
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