Abstract:

Social spending is an economic policy that covers the support made in a society for low-income groups to reach a certain level of well-being. Success in a country’s economic growth performance is not an indicator sufficient for its development. In addition to growth, the fair distribution of national income among households is also an important macroeconomic issue. The social expenditure is a way to solve this problem. Our study examines the relationship between social expenditure and income distribution in order to test the functionality of this solution. Our study, which includes the OECD countries, has taken into account the period 1980-2015 with Pedroni and Kao Panel Integration and Dumitrescu-Hurlin Panel Causability Methods. According to the results of the analysis, a significant link has been found between social spending and income distribution in OECD countries. Moreover, there was a causal relationship between social expenditure and income distribution. As a political proposal, a joint fund for social spending within the OECD was proposed and the fund was transferred to the poor groups.

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