Does spending on social-welfare policies reduce poverty? An assessment of the European Union countries using impulse-response and efficiency methods


Purpose – We answer two questions: (i) does the spending on social-welfare policies constitute a statistically-significant impulse for reducing poverty among various risk groups in the EU countries? And (ii) what is the level of efficiency of social spending when it comes to reducing various problems associated with poverty in the EU member states?

Research method – We use two research methods: Vector Error Correction Model (VECM) and extended Data Envelopment Analysis (DEA).

Results – We find that social-welfare policies in most of the EU countries create a sufficient impulse to reduce poverty among old aged people and survivors, families with children and the unemployed. However, the impulse is often not sufficient in the case of people with problems in meeting housing needs, as well as sick or disabled. What is more, the relative efficiency of social-welfare spending in some of the EU countries is low, what suggest that better outcomes may be achieved not only by increasing the spending, but also by improving the policies among current amount of funds. Surprisingly, the best-performing countries in reducing the poverty by social-welfare policies include, next to Denmark and Finland, also some Central and Eastern European countries: Czechia, Poland, Slovakia and Slovenia.

Originality / value – We extend the knowledge on the efficiency and effectiveness of government activities for the purpose of limiting poverty.


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