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The redistributive function of the EU budget

Author

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  • Paolo Pasimeni
  • Stéphanie Riso

Abstract

This paper measures the net redistributive impact of the EU budget. It finds that for every €1,000 difference in income per capita across countries, €9 is offset by lower contributions to the budget and € 3 is offset by higher expenditures by the budget. The overall equalising effect is small (1.1%) and depends on the revenue side, in particular on the national contribution based on GNI and VAT, which is also the main source of stabilisation. The analysis shows how the various corrections mechanisms applied to the revenue side of the budget reduce its redistributive and stabilisation capacity. The policy conclusions are that on the revenue side, since the national contribution based on GNI is the main source of redistribution and stabilisation), its reduction could reduce the already minimal capacity of the budget to perform these functions. On the expenditure side, the shift from pre-allocated types of expenditures towards non-pre-allocated ones may determine a reduction of the overall redistributive capacity of the budget.

Suggested Citation

  • Paolo Pasimeni & Stéphanie Riso, 2016. "The redistributive function of the EU budget," IMK Working Paper 174-2016, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    • Handle: RePEc:imk:wpaper:174-2016
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    File URL: http://www.boeckler.de/pdf/p_imk_wp_174_2016.pdf
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    References listed on IDEAS

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    1. Pierfederico Asdrubali & Soyoung Kim, 2008. "The Economic Effects of the EU Budget: A VAR Analysis," Journal of Common Market Studies, Wiley Blackwell, vol. 46(5), pages 933-968, December.
    2. repec:bla:jcmkts:v:46:y:2008:i::p:933-968 is not listed on IDEAS
    3. Angel De La Fuente & Rafael Doménech, 2001. "The Redistributive Effects of the EU Budget: An Analysis and Proposal for Reform," Journal of Common Market Studies, Wiley Blackwell, vol. 39(2), pages 307-330, June.
    4. James Feyrer & Bruce Sacerdote, 2013. "How Much Would US Style Fiscal Integration Buffer European Unemployment and Income Shocks? (A Comparative Empirical Analysis)," American Economic Review, American Economic Association, vol. 103(3), pages 125-128, May.
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    Cited by:

    1. Rinaldi, David & Núñez Ferrer, Jorge, 2017. "The European Fund for Strategic Investments as a New Type of Budgetary Instrument," CEPS Papers 12433, Centre for European Policy Studies.

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    More about this item

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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