Explaining the 'Return of the State' in Middle-Income Countries: Employment Vulnerability, Income, and Preferences for Social Protection in Latin America

Abstract

In recent decades, developing and middle-income countries around the globe have adopted path-breaking reforms to their social protection systems. Among these countries, Latin America has been a pioneer, expanding the state’s commitment on behalf of low-income citizens in key policy areas. This paper undertakes two tasks. First, it documents the surprising extension of noncontributory social protection policies across many Latin American countries, highlighting how tax-financed programs have come to play a central role in a variety of settings. Second, it examines citizen-level preferences that support this trend, arguing that employment vulnerability and threats to income continuity play a decisive role in shaping demand for public, rather than private, social protection. Survey data on labor-market risks and social policy preferences from eighteen countries corroborates these claims. Our findings suggest that other countries undergoing labor-market strains may experience similar demands for a “return of the state” as a guarantor of social protection in the coming years.