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Economic Policy Uncertainty and Income Inequality Across Europe

Don Bredin, Stilianos Fountas Orcid Logo, Evi Tzika Orcid Logo

International Journal of Finance & Economics, Pages: 1 - 17

Swansea University Author: Evi Tzika Orcid Logo

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DOI (Published version): 10.1002/ijfe.70161

Abstract

This paper investigates the impact of Economic Policy Uncertainty (EPU) on incomeinequality across a broad set of European countries from 1995 to 2022, with a particular focus on the core-periphery divide. Applying both time series and panel datamethodologies—including Vector Autoregressions (VAR),...

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Published in: International Journal of Finance & Economics
ISSN: 1076-9307 1099-1158
Published: Wiley 2026
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URI: https://cronfa.swan.ac.uk/Record/cronfa71330
Abstract: This paper investigates the impact of Economic Policy Uncertainty (EPU) on incomeinequality across a broad set of European countries from 1995 to 2022, with a particular focus on the core-periphery divide. Applying both time series and panel datamethodologies—including Vector Autoregressions (VAR), panel VAR, and local projections—we assess how economic uncertainty influences inequality dynamics. Our findingsreveal three key insights. First, uncertainty shocks significantly affect income inequalityin nearly all countries, and the effect is time-varying. Second, the effect is heterogeneousacross countries but varies: uncertainty tends to reduce inequality in core Europeancountries such as Belgium, Germany, Ireland, and the Netherlands, while mainly increasing it in periphery and intermediate countries like France, Greece, Italy, and Spain.Third, panel analysis confirms this asymmetry, showing more persistent and positiveinequality effects in periphery countries. These results suggest that income inequalityin Europe’s periphery is more vulnerable to economic uncertainty, underscoring theimportance of stable policy environments and targeted fiscal responses.
Keywords: economic uncertainty, income inequality, panel LP, rolling impulse response functions, VAR models
College: Faculty of Humanities and Social Sciences
Funders: This work was supported by the University of Macedonia ResearchFund and Science Foundation Ireland (SFI) (16/SPP/3347).
Start Page: 1
End Page: 17

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