Social expenditure and the politics of redistribution

Abstract

This article offers a critique and analysis of recent OECD research by Adema and Ladaique identifying the impact of taxes and private benefits on social spending. By using the techniques of multivariate modelling, we show that both gross public and net private expenditures are strongly influenced by partisan incumbency, although in opposite directions, and that the more we net out the effect of taxes, the less politics matters and the more spending is shaped by socio-economic forces. In a second stage of the analysis, we show that the crucial mechanism of welfare state redistribution is the taxation of gross social expenditure and demonstrate that this effect is almost entirely political in nature.