Private Social Expenditure Research Articles

Impacts of Economic Freedom, Health, and Social Expenditures on Well-Being Measured by the Better Life Index in OECD Countries

ABSTRACT The Organization for Economic Co-operation and Development (OECD) has developed the Better Life Index (BLI), which is a multidimensional approach to well-being. This study aims to investigate the impact of health and social expenditures as well as the economic freedom index on well-being measured by BLI among 34 OECD countries for 2013–2017 period. We estimated panel models to observe the social and health expenditure effects according to their sources and the overall impact of economic changes among countries. We find that public and private social expenditures have a positive and statistically significant impact on BLI at 1% significance level. Additionally, whereas public health expenditure has a positive and statistically significant impact on BLI at 1% significance level, the effects of private health expenditure are statistically significant at 10% significance level. The economic freedom index has a positive and statistically significant impact on BLI in both models. Both social and health expenditures should take a prominent position in policy debates for a better life.

National Social Benefit Systems and Entrepreneurial Intentions: A Cross-National and Cross-Level Analysis

In this study, we examine how social benefit systems (public and private social expenditure) may influence entrepreneurial intentions, and how it may moderate the relationship between fear of failure and entrepreneurial intentions. Our cross-level model of 97,012 people from 32 countries demonstrates that individuals in countries with high levels of public social expenditure are less likely to show entrepreneurial intentions because they compare and contrast the safety net provided by social systems versus risk associated with starting a business. In addition, the results show that higher levels of private social spending weaken the negative impact of fear of failure on entrepreneurial intentions.

Assessment of the social expenditure impact on the economic growth in OECD countries

Economic growth is exposed to many socio-economic factors that impact both the formation and allocation of resources. The theoretical part of this article discusses studies by various authors on the social expenditure impact on economic growth, the dependence of this influence on selected funding principles and social policy models. In the empirical part, using the Pooled Mean Group (PMG) procedure and the Fixed Effect Model, the impact of social expenditure on the economic growth in OECD countries is determined. An increased focus is put on assessing the long-term impact of the main types of social expenditures (public and private), based on different financing principles (distribution and accumulation), on the economic growth rates both in OECD in general and in the context of countries (based on the Esping-Andersen’s typology) grouped according to social policy models. The following conclusions are drawn: 1) an increase in the share of total social expenditures in the country’s GDP negatively affects economic growth; 2) an increase in the share of private social expenditures in the country’s GDP contributes to economic growth; 3) the obtained indicators of impact assessment are different depending on a social policy model chosen. The analysis is based on OECD panel data for the period 1980–2013.

Differences in Anti‐Poverty Approaches in Europe and The United States: A Cross‐Atlantic Descriptive Policy Analysis

AbstractPoverty alleviation is an important objective of European countries and of the United States. If these ‘rich’ states offer elaborate systems of income maintenance, why is there still a considerable amount of poverty? And why are anti‐poverty outcomes so different in the United States compared to European countries? This paper completes a trilogy of cross‐country research papers on anti‐poverty policy. Two former papers analyzed the effects of social transfers on both poverty levels and poverty alleviation through tax and social transfer systems. These papers marked the United States as an outlier: high poverty rates, low public social spending but high private social expenditures, a rather strong belief that people are poor because of laziness or lack of will, and remarkable differences across the Federal States caused by state discretion. Therefore, this paper discusses differences in anti‐poverty approaches between the European Union and the United States.

Welfare Reform in the U.S.: A Policy Overview Analysis

AbstractSeveral previous papers have marked the United States as an outlier: high poverty rates, low public social spending but high private social expenditures; a rather strong belief that people are poor because of laziness or lack of will; and remarkable differences across the States due to state discretion. With that established context in mind, this paper analyzes U.S. welfare in more detail, focusing on the impact of TANF—part of the major welfare reform that took place in the United States in 1996. U.S. welfare reform emphasized an American preference for work, and it was a move further away from the strategies other “wealthy” nations use to address poverty. Initially U.S. welfare reform did serve to increase work participation rates, although the earnings of most individuals who left welfare were still below the poverty line, even many years after their exit. We found huge variation of welfare eligibility rights across states, depending on the state's ability to pay and preferences to meet a certain level of social standard or other (social) objectives such as child care, work support and employment programs.

Social Income Transfers and Poverty Alleviation in OECD Countries

Poverty alleviation is an important policy objective in developed welfare states. This paper analyzes the effect of social transfer policies on poverty. A vast literature claims that high social effort goes along with low poverty levels across countries. This paper systematically analyzes this claim. We employ several social expenditure ratios (as a proxy for social effort) and correct for the impact of the tax system and for private social arrangements, using OECD methodology. Also, we control for emographic and macro-economic differences across countries. We performed several tests with the most recent data (LIS, OECD, and SOCX) for the period 1985-2005. Our results are less clear-cut than earlier findings. We still find quite a strong negative relationship between the level of public social expenditure and poverty among 28 OECD countries. However, for non-EU15 countries this relationship is stronger than for the EU15. The results alter considerably if private social expenditures are included as well. For non-EU15 countries in our sample, we do not find evidence for a negative correlation between the level of total social spending and the incidence of poverty. In contrast, for the group of EU15 countries private social arrangements do matter as far as poverty alleviation is concerned. Demographic and macro-economic (control) variables are important as well. We developed and employed multiple linear regression models to control for these complex interrelationships. Our results point at one direction: gross social spending is the driving force as far as differences in poverty levels across countries are concerned, although the ageing of the population and unemployment rates have some explanatory power, both for non-EU15 countries and for EU15 countries. Our analyses captures another effect as well. It is essential to control for the impact of taxes on the social expenditure ratios used. By doing so, the linkage between social effort and poverty levels across countries becomes insignificant. In view of the fact that with these corrections on expenditure statistics, we have a much better - although still not perfect - measure of what governments really devote to social spending, the familiar claim that higher social expenditure goes along with lower poverty levels does not hold across the 28 examined countries examined. We believe that our comparison of the impact of several social expenditure ratios on poverty levels has emphasized that taking into account both the public/private-mix and the impact of the tax system on social expenditure ratios really matters for comparative welfare state research and for policy makers who want to reduce poverty.

The redistributive effect of public and private social programmes: A cross‐country empirical analysis

AbstractA function of many national social protection systems is to substantially redistribute income. However, the size and nature of social protection programmes are changing. In a number of countries there has been a shift from public towards private social protection arrangements, with the latter substituting for, or complementing, public programmes. Developing earlier work, this present article analyses the redistributive impact on income of public versus private social protection programmes. Using recent data from the Organisation for Economic Co‐operation and Development, we find a strong positive relationship between public social expenditures and income redistribution across countries. For private social expenditures, we find a weak, but statistically significant, negative relationship with the level of redistribution. In countries where a larger share of total social expenditure is accorded to private arrangements there is less income redistribution. We conclude that the choice between the relative weight of public and private provision of social protection affects the redistributive impact of the welfare state.

The Division of Labour in Education Funding: A Cross-National Comparison of Public and Private Education Expenditure in 28 OECD Countries

Whereas the division of labour between the state and the private sector regarding the costs of education constitutes a major bone of contention in public debates and varies widely between OECD countries, it has hitherto hardly been scrutinized empirically. This paper identifies its most important political, social and cultural determinants in 28 OECD member states. The major findings are that the publicness of education funding is lower where Conservative and Christian centre parties govern and where Protestantism is more widespread, whereas the influence of trade unions and, perhaps surprisingly, Liberal parties increases the ratio of public to private education expenditure. Further, but smaller effects are yielded by federalism and fiscal decentralization, public subsidies for educational purposes, public indebtedness and intra-firm vocational training systems in the former and by mandatory private social expenditure in the latter direction.

The Redistributive Impact of Public and Private Social Expenditure

Most analyses of social protection are focussed on public arrangements. However, social effort is not restricted to the public domain; all kinds of private arrangements can be substitutes to public programs. In fact, in several countries there has been a shift from public towards private social arrangements. OECD-data indicate that accounting for private social benefits has an equalising effect on levels of social effort across a number of countries. This suggests that public and private social expenditures are complementary to some extent. But their distributional effects differ. In all OECD countries, the social protection system causes a more equal distribution of incomes. Indeed, using cross-country data, we find a negative relationship between public social expenditures and income inequality and a positive relationship between public social expenditure and income redistribution. But we do not find a significant positive relationship between private social expenditures and income inequality or income redistribution. Consequently, changes in the public/private-mix in the provision of social protection may affect the redistributive impact of the welfare state.

Are Public and Private Social Expenditures Complementary?

Most analyses of social protection are focussed on public arrangements. However, social effort is not restricted to the public domain; all kinds of private arrangements can be substitutes to public programs. OECD data indicate that accounting for private social benefits has an equalising effect on levels of social effort across a number of countries. This suggests complementarity between public and private social expenditures. But their distributional effects differ. Using cross-country data, we find a negative relationship between net public social expenditures and income inequality, but a positive relationship between net private social expenditures and income inequality. We conclude that changes in the public/private mix in the provision of social protection may affect the redistributive impact of the welfare state.

Should We Extend the Role of Private Social Expenditure?

Some people make great claims about the advantages to be gained from greater reliance on the private sector for the provision of social protection. Many of the claims for great macroeconomic advantages do not stand up to scrutiny. However, there is some reason to hope that private provision might promote microeconomic efficiency and services which are more responsive to consumer preferences than those provided by a single monopoly public sector provider. Drawing on examples from recent OECD country experiences with private health insurance, care for children and the elderly, and private pension provision, three main conclusions can be drawn. First, opening provision to a diversity of providers has often promoted more choice and innovation. Second, however, efficiency gains have often been limited. This is due to a number of inter-related reasons: (a) Individualisation of packages of services is expensive. (b) In order to ensure adequate coverage of the population, cross-subsidisation of particular groups of people is often mandated on providers, reducing cost-competition and diversity of choice. (c) Informational asymmetries (how good is this childcare which I cannot personally monitor, or this health care package which I am not technically able to assess?) cannot be overcome without extensive regulation, which has the effect of limiting innovation and competition. (d) The fiscal incentives necessary to stimulate private provision are high, and have welfare costs of their own. Third, and related to this last point, the distributional effects of private provision raise significant social problems. Private financing and provision of social benefits is not a magic wand; waving it in the social protection field will not mean that the economy and voters will be freed from some great deadweight that has been dragging them down. Nevertheless, the private sector can sometimes deliver either a slightly cheaper, slightly more varied or slightly more flexible system of social protection.