Demographics, Taxes, and Social Spending in the E.U.

Abstract

This paper presents a panel data analysis of general government spending on health, education, and the major components of social protection in light of demographic trends (aging and migration) and selected domestic revenue sources (personal and corporate income taxes) across 27 E.U. member states, excluding the U.K., from 2006 to 2018. The countries are grouped into developed and transitional economies. The model employed produces statistically significant and intuitively reasonable results for spending on education, old age, sickness and disability, and unemployment in developed economies. The author suggests that an omitted variable, lobbying, might be a determinant of the developed economies’ spending on health. In the case of the transitional economies that emerged from the former Soviet bloc, interdisciplinary research might aid in the development of a more suitable model.