Towards a common EU policy on income distribution: the case of social benefit expenditures

The observed "soft" coordination at European and national level has hindered progress in terms of raising social welfare and reducing the risk of poverty in EU. This is a source of concern given that the fruits of economic efficiency should be shared by the individuals and Member States of EU in an equitable manner. Raising social welfare would assist the process of building up the necessary social consensus in favour of structural reforms in product and capital markets, which in turn would further enhance economic efficiency. This paper focuses on a key indicator of social policy in national agendas which is the social expenditure as a percent of the GDP so as to assess whether there is convergence in social policy across European countries. The empirical analysis utilises information from 18 European countries over the period 1990-2004 and appropriate methodological tools of absolute ó-convergence and analysis of distribution dynamics.