Economic growth or social expenditure: what is more effective in decreasing poverty and income inequality in the EU – a panel VAR approach

Are economic growth and social expenditure effective in decreasing poverty and income inequality in the European Union? We try to provide an answer to this question by using a Panel VAR model for the period from 2010 to 2019, using a sample of 28 European member states plus Norway and Iceland. We fi...

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Bibliographic Details
Main Authors: Velkovska, Ivana, Trenovski, Borce
Format: Article in Journal/Newspaper
Language:English
Published: Institute of Public Finance, Zagreb 2023
Subjects:
panel VAR model
poverty
income inequality
economic growth
social expenditure
European Union
Norway
Iceland
Online Access:https://hrcak.srce.hr/ojs/index.php/pse/article/view/24165
Description
Summary:Are economic growth and social expenditure effective in decreasing poverty and income inequality in the European Union? We try to provide an answer to this question by using a Panel VAR model for the period from 2010 to 2019, using a sample of 28 European member states plus Norway and Iceland. We find that although both economic growth and social expenditure decrease poverty, economic growth is more effective at decreasing poverty than social expenditure. However, when it comes to income inequality, economic growth seems to increase it, while social expenditure seems to lower it.

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