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

Arbeitspapier

This paper analyzes the relationship between economic growth, inequality and redistribution. In a cross-country setting for 25 EU countries over the period 2007-2019, we show that market income inequality is associated with higher growth in the short run. To estimate the impact of redistribution to low-income earners, we introduce a new measure, the so-called net benefit share (NBS). Contrary to other findings, we show that this (targeted) redistribution to low income earners (Q1 NBS) boosts growth in the short run, driven by the consumption and private investment channels. On the other hand, untargeted redistribution to higher income earners reduces growth.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Research Paper ; No. 27

Classification and Topics

• Classification: Wirtschaft ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence ; Equity, Justice, Inequality, and Other Normative Criteria and Measurement
• Subject: growth ; redistribution ; inequality ; European Union

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Köppl-Turyna, Monika ; Christl, Michael ; De Poli, Silvia
• Event: Veröffentlichung
• (who): EcoAustria - Institute for Economic Research
• (where): Vienna
• (when): 2024

Further information

• Handle: http://hdl.handle.net/10419/285354
• Last update: 10.03.2025, 11:45 AM CET