Relationships between Pension Spending, Poverty Reduction, and Economic Growth: Evidence from the European Union Countries

Abstract

Purpose:The purpose of this paper is to examine the impact of pension spending on both poverty and economic growth. Design/Methodology/Approach: The paper considers pooled ordinary least squares and fixed effects regression models as well as two-stage least squares (2SLS) regression analysis, and uses annual panel data from 24 European Union Member States, from 2007 to 2018. Findings: The results show that pension spending is relevant for reducing poverty and suggest that pension spending has no impact on gross domestic product growth. Practical implications: The results in this paper should advance our understanding of the fundamental role of public pension systems in alleviating poverty and in contributing to inclusive growth.Originality value: To our knowledge, our study is the first that utilises pension expenditure and its impact on both poverty and economic growth using data from European Union countries.