Analysis of the Impact of Government Spending on Income Inequality in the EU Member States

Costinela Fortea, Valentin-Marian Antohi, Ioana Lazarescu and Doina Iacob
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Costinela Fortea: Dunarea de Jos University of Galati, Romania
Valentin-Marian Antohi: Dunarea de Jos University of Galati, Romania
Ioana Lazarescu: Dunarea de Jos University of Galati, Romania
Doina Iacob: Dunarea de Jos University of Galati, Romania

Economics and Applied Informatics, 2025, issue 3, 60-71

Abstract: This paper examines the impact of government spending and other economic factors on income inequality in the 27 Member States of the European Union for the period 2012-2023, using a linear regression model on panel data. The study focuses on analysing the influence of various components of government spending, including health, education, public order, social protection and other economic sectors, as well as the effects of public debt and at-risk-of-poverty on income distribution. This is done in the context of European strategies aimed at promoting social and economic cohesion, such as the European Pillar of Social Rights, the Strategy for a Green and Digital Europe and the 2030 Agenda for Sustainable Development. The results of the study show that public spending on health and education has a significant negative effect on income inequality, confirming the importance of these sectors in promoting social equity. The analysis also reveals a significant positive association between the risk of poverty and income inequality, indicating the need for more effective redistributive measures to reduce economic polarization. The study contributes to the literature by integrating a recent period characterized by multiple economic and social crises, including the COVID-19 pandemic. The novelty of the research also lies in the detailed assessment of the effects of different categories of government spending on income distribution, providing relevant recommendations for European public policies, including strengthening investments in health, education and social protection to reduce economic and social inequalities and achieve the economic and social cohesion objectives set at the European Union level.

Keywords: government spending; fiscal policy income inequality; European Union; public policies; social cohesion (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ddj:fseeai:y:2025:i:3:p:60-71

DOI: 10.35219/eai15840409548

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