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

Year: 2025

Type: article

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. • The paper examines the impact of inequality and redistribution on economic growth in the EU. • We introduce the Net Benefit Share (NBS) to measure targeted redistribution. • Targeted redistribution to low-income households boosts growth through consumption and investment. • Redistribution to high-income earners and pensioners has a negative impact on economic growth. • The results suggest that well-targeted redistributive policies are crucial to increase growth.

Source: Economic Modelling

DOI: 10.1016/j.econmod.2025.107104

Authors: Michael Christl, Silvia De Poli, Monika Köppl-Turyna

Institutions: Universidad Loyola Andalucía, Universidad Complutense de Madrid, Seeburg Castle University, EcoAustria Institut für Wirtschaftsforschung, University of Warsaw

Language: English

Topic: Income, Poverty, and Inequality

Subfield: Sociology and Political Science

Field: Social Sciences

Domain: Social Sciences

SDGs: Reduced inequalities, No poverty, Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $3,660