Explaining the “Return of the State” in Middle-Income Countries

Abstract

In recent decades, developing and middle-income countries around the globe have adopted path-breaking reforms to their social protection systems. Latin America has been a pioneer region, expanding the state’s commitment on behalf of low-income citizens in key policy areas in many countries. 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 corroborate 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.