The Importance of Social Government Expenditures for Income Inequality in EU Countries

Karina Zhemelko and Nikola Šubová

Politická ekonomie, vol. preprint

Abstract: The issue of growing income inequality has become a central focus in global economic policy debates. This paper examines the impact of social government spending on income inequality in the 27 Member States of the European Union between 2010 and 2020, utilizing regression analysis of panel data. The findings indicate that the level of social government spending reflects the varying fiscal policies on social protection across EU countries, with the largest share allocated to old age expenditure. However, the analysis reveals that old age government expenditure does not have a statistically significant impact on income inequality. In contrast, increased spending on unemployment benefits, and support for families and children, is associated with a reduction in income inequality. These results underscore the need to address structural disparities and provide targeted unemployment and family support to ensure adequate living conditions for vulnerable groups.

Keywords: Income inequality; S80/S20 index; Gini coefficient; social government spending; panel analysis (search for similar items in EconPapers)
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DOI: 10.18267/j.polek.1481

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