Does redistribution hurt growth? An empirical assessment of the redistribution–growth relationship in the European Union

Michael Christl, Silvia De Poli and Monika Köppl-Turyna

Economic Modelling, 2025, vol. 149, issue C

Abstract: This paper examines the impact of inequality and redistribution on economic growth in the EU. While past research finds inequality harms long-term growth, the effects of redistribution remain debated. Using panel data from 25 EU countries (2007–2019), we introduce the Net Benefit Share as a measure for targeted redistribution. Our findings show that market inequality boosts short-term growth, but redistribution targeted to low-income households further enhances it mainly via the consumption channel. In contrast, redistribution to high-income earners and pensioners reduces growth. These results highlight the importance of well-targeted redistributive policies for economic performance.

Keywords: Growth; Redistribution; Inequality; European union (search for similar items in EconPapers)
JEL-codes: D63 H23 O47 (search for similar items in EconPapers)
Date: 2025
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Related works:
Working Paper: Does redistribution hurt growth? An Empirical Assessment of the Redistribution-Growth Relationship in the European Union (2024)
Working Paper: Does redistribution hurt growth? An empirical assessment of the redistribution-growth relationship in the European Union (2024)
Working Paper: Does redistribution hurt growth? An Empirical Assessment of the Redistribution-Growth Relationship in the European Union (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:149:y:2025:i:c:s0264999325000999

DOI: 10.1016/j.econmod.2025.107104

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