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

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  • Christl, Michael
  • De Poli, Silvia
  • Köppl-Turyna, Monika

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.

Suggested Citation

  • Christl, Michael & De Poli, Silvia & Köppl-Turyna, Monika, 2025. "Does redistribution hurt growth? An empirical assessment of the redistribution–growth relationship in the European Union," Economic Modelling, Elsevier, vol. 149(C).
    • Handle: RePEc:eee:ecmode:v:149:y:2025:i:c:s0264999325000999
    DOI: 10.1016/j.econmod.2025.107104
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    More about this item

    Keywords

    Growth; Redistribution; Inequality; European union;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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