Cohesion policy and household income inequality: evidence from the Greek regions

This paper sets out to examine whether cohesion policy is associated to a reduction of household income inequality within the Greek regions. The analysis is built upon a unique database, which includes two types of data sources: public investment expenditures data along with household declared income data at the NUTS III geographical level in Greece. The results indicate that an increase in public investment expenditures is associated with an increase in income inequality, and this finding is more attributable to the EU co-financed than the nationally funded public investment projects. Nevertheless, the results are sensitive to the type/category of spending; there is evidence that “education and research” co-financed projects and the national “miscellaneous” expenditures, which include small-scale fiscal support to places, communities and associations, generate more egalitarian benefits among households across regions. These findings of this paper call for a readjustment and targeting of the cohesion policy to promote people-centered, along with place-specific, policies with the creation of more job opportunities and higher earnings for low-income households.