Government Social Expenditure and Income Inequalities in the European Union

This paper analyzes the relationship between public social expenditure and income inequality distribution in the 28 Member States of the European Union, throughout the period 2005-2014. We estimate dynamic panel models. The results show the existence of a negative correlation between public social expenditure as a whole and income inequality. Distinguishing among different expenditure concepts, the association between social expenditure and income inequality may be different in the emerging Member States as compared to the rest of the States. In the emerging States, spending on health and spending on social protection are negatively associated with income inequality, and in the rest of States, this redistributive function is carried out only by spending on social protection. Spending on education is not significantly related to income inequality in any group of studied countries.