Research Paper 27: Does redistribution hurt growth?

This research paper shows that targeted redistribution can be a key driver of sustainable economic growth. In this context, policy makers should step up their efforts to prioritize redistributive measures that benefit low income earners in particular. In this way, economic development can be promoted without losing sight of the goal of growth.

It is important to emphasize that such an approach does not imply a conflict between growth and redistribution, provided that redistribution is effectively designed. Unfortunately, this is not yet the case in many countries. For example, in countries such as Austria, Greece or Italy, a considerable part of redistribution is carried out through pensions, with a large proportion benefiting people with higher incomes. In contrast, redistribution in countries such as Denmark or the Baltic states is more targeted towards low-income earners.

Denmark is an outstanding example, as it practices targeted redistribution despite having an extensive welfare state. The organization of pensions also differs: the state finances significant parts of pensions for low earners from tax revenue, while higher earners generally have company-funded pension plans.