Social Exclusion and Economic Growth: An Empirical Investigation in European Economies

The aims of this article are to propose an overall index of social exclusion and to analyze its relationship with economic growth in European countries. We approach social exclusion as a multidimensional phenomenon by a three-mode principal components analysis (Tucker3 model). This method is applied to estimate an indicator of social exclusion for 28 European countries between 1995 and 2010. The empirical evidence shows that in short run (a) Granger causality runs one way from social exclusion to economic growth and not the other way; (b) countries with a higher level of social exclusion have higher growth rates of real GDP per capita; and (c) social exclusion has a larger effect than the income inequality on the economic growth. The policy implications of our analysis is that social inclusion is not a source of economic growth in the short term.