Redistribution and the alleviation of income inequalities: the case of the European Union

Abstract

Motivation: The income inequalities are considered an important economic and social problem, because increasing income inequalities may make it difficult to achieve such policy goals as: social cohesion and inclusive development. State's interference through redistribution is aimed to decrease the differences between the rich and poor. Even though social transfers alleviate the income inequalities, the extent to which they decrease the gap between the rich and the poor is different in European Union (EU) countries. The answer to the question of redistribution effectiveness is extremely important from this perspective.Aim: The article aims to present the diversity of EU countries from the perspective of income inequalities, social transfers (government expenditures on social protection, health and education) and finally redistribution. Its aim is also to assess the impact of social transfers on inequalities on the basis of dynamic panel data model.Results: There is no significant relationship between the level of social transfers and Gini disposable income. However, the results of regression analysis proved that government expenditures on social protection significantly increase the difference between market and disposable income inequalities (Gini gap) and therefore more effectively decrease income inequalities.