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

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  • Ivana Velkovska

    (Ss. Cyril and Methodius University Skopje, Skopje, Republic of North Macedonia)

  • Borce Trenovski

    (Ss. Cyril and Methodius University Skopje, Skopje, Republic of North Macedonia)

Abstract

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.

Suggested Citation

  • Ivana Velkovska & Borce Trenovski, 2023. "Economic growth or social expenditure: what is more effective in decreasing poverty and income inequality in the EU - a panel VAR approach," Public Sector Economics, Institute of Public Finance, vol. 47(1), pages 111-142.
    • Handle: RePEc:ipf:psejou:v:47:y:2023:i:1:p:111-142
    DOI: 10.3326/pse.47.1.5
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    References listed on IDEAS

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    More about this item

    Keywords

    panel VAR model; poverty; income inequality; economic growth; social expenditure; European Union;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • B55 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Social Economics
    • D6 - Microeconomics - - Welfare Economics
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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