The Role of Fiscal Policy in Reducing Income Inequalities – The Experiences of Selected EU Member States

Abstract

As far as social inequality is concerned, the unprecedented scale of crisis phenomena in the global economy during the recent years (including in particular the economic crisis of 2008) and the progressing globalization processes, contributed to the restatement of the neoliberal paradigm claiming that inequalities are the positive drive for economic activeness, innovation and creativity which are beneficial for the economic growth. The ideas on the potential application of fiscal policy for compensatory purposes have also been recently changed. Thus, considering the afore-mentioned evolution of ideas, the search for the optimum state intervention methods allowing for the achievement of the assumed economic and social goals, and at the same time free of the anti-growth drawbacks so much criticized by the representatives of liberal ideas, have become a vital issue. The main purpose of the article is to analyze and to evaluate the range and effectiveness of the selected fiscal instruments applied in order to reduce the scale of income inequalities during the last economic downturn. The paper is based on the experiences of twenty selected EU member states (which are also OECD member countries)covering the years 2007–2012.