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What drives inequality and poverty in the EU? Exploring the impact of macroeconomic and institutional factors


  • Yannis Dafermos
  • Christos Papatheodorou


Employing panel data techniques, we investigate the macroeconomic and institutional determinants of inequality and poverty in the EU over the period 1994--2008. We pay particular attention to the effects of macroeconomic environment, social protection and labour market institutions. The empirical analysis shows that the social transfers in cash, and principally the transfers that do not include pensions, exert a prominent impact on inequality and poverty. Also significant is the effect of the GDP per capita. The impact of employment on inequality and poverty is not empirically sound. The same holds for the labour market institutions; an exception is the union density, which appears conducive to a less dispersed personal income distribution. Importantly, the results support the view that the social protection system acts as a catalyst in determining the effectiveness of social spending and the distributive role of economic growth and employment.

Suggested Citation

  • Yannis Dafermos & Christos Papatheodorou, 2013. "What drives inequality and poverty in the EU? Exploring the impact of macroeconomic and institutional factors," International Review of Applied Economics, Taylor & Francis Journals, vol. 27(1), pages 1-22, January.
  • Handle: RePEc:taf:irapec:v:27:y:2013:i:1:p:1-22
    DOI: 10.1080/02692171.2012.696590

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    Cited by:

    1. Dünhaupt, Petra, 2014. "An empirical assessment of the contribution of financialization and corporate governance to the rise in income inequality," IPE Working Papers 41/2014, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    2. Tausch, Arno, 2015. "Wo Frau Kanzlerin Angela Merkel irrt: Der Sozialschutz in der Welt, der Anteil Europas und die Beurteilung seiner Effizienz
      [Where Chancellor Angela Merkel got it wrong: social protection in the wo
      ," MPRA Paper 66462, University Library of Munich, Germany.
    3. Giorgos Argitis & Stella Michopoulou, 2013. "Studies in Financial Systems No 4 Financialization and the Greek Financial System," FESSUD studies fstudy04, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    4. Pierre Monnin, 2014. "Inflation and Income Inequality in Developed Economies," Working Papers 1401, Council on Economic Policies.

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