Public Social Expenditure Research Articles

Search for an Appropriate Level of Korean Public Social Expenditures in Comparison with OECD Countries.

Search for an Appropriate Level of Korean Public Social Expenditures in Comparison with OECD Countries.

El gasto sanitario en el contexto del gasto social. Un análisis generacional de las tendencias en España en un contexto de envejecimiento demográfico. Informe SESPAS 2008

The tendency for public welfare spending to be increasingly aimed at the elderly has been identified in several developed countries. While population aging is a common trend, it is not obvious why the shift in spending exceeds the trend in aging, or why per capita spending on the elderly is increasing. In the first part of the present article, we show that this trend is occurring in Spain, identify the losers from this development, discuss the policies that underlie it, and propose adjustments based on Musgrave's fixed proportions rule for fair intergenerational distribution. These policies aim to manage population aging, labor market participation of youth and women, as well as public policies that combine ‘work-fare’ strategies with the more traditional ‘welfare’ strategies. In the second part of this paper, we explore the contribution of public health expenditure to overall public social expenditure, and analyze the effect of increasing health on distributional fairness. This analysis is guided by our perception that social policy, including health policy, should be more horizontal, i.e. it should take into account the sum total of a mixed basket of resources aimed at any recipient group, to avoid the skewed allocation of resources that arises from compounding various independent distributions of resources. Coordination of the various channels of social expenditure should ensure precisely targeted recipients and cross-departmental sources. The normative fairness criterion to be used should be precisely specified. In Spain (1980-2000) the oldest segment of the population has gained the most, appropriating an increased share of resources. This increase goes beyond the amount that could be explained by population aging throughout the period. The ‘losers’ are individuals with different fragility conditions. On average the youngest working group has suffered the highest relative loss.

Revisiting the welfare state system in the Republic of Korea

Abstract The Republic of Korea's welfare system has undergone radical institutional expansion since the 1990s, largely as a consequence of the financial crisis of 1997. In spite of these changes, public social expenditure remains extremely low — particularly with regard to all other OECD countries — with the result that the overall social insurance system and social welfare service sector remain underdeveloped. Thus, the current welfare system can best be characterized as a residual model, in that state intervention as a provider of welfare remains highly limited and the family and the private market economy play the central roles in offering a social safety net. This situation is largely the legacy of the so‐called ‘growth‐first’ ideology, which has remained the dominant approach favoured by the majority of the country's political and economic decision‐makers since the period of authoritarian rule (1961‐1993). The adoption of Western European‐style neo‐liberal restructuring, implemented following the 1997 financial crisis, has also played a role.

Foreign direct investment, tax competition and social expenditure

The aim of this paper is to make a first step towards studying the role of social expenditure and its interaction with corporate taxation in determining the destination of foreign direct investment (FDI) flows. Using panel data for 18 OECD countries and measuring the extent of social welfare policies by the (public social expenditure)/GDP ratio, we find strong support for the conjecture that redistributive social welfare state policies are valued by multinationals as, for instance, they may signal a government's commitment to social stability.

Selection and network effects—Migration flows into OECD countries 1990–2000

This paper presents empirical evidence on immigration flows into the OECD countries during the period 1990–2000. Our results indicate that network effects are strong, but vary between different groups of welfare states and between countries according to the type of immigration policy being applied. Network effects seem to be less important in the Nordic countries which also seem to attract immigrants from the lowest income level source countries. We do not find clear evidence that selection effects measured by migration flows being sensitive to differences in public social expenditures have had a major influence on the observed migration patterns until now. This may partly be explained by restrictive migration policies which may have dampened the potential selection effects.

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.

La economía política de la justicia distributiva en Colombia

Siguiendo un enfoque “Hirschmaniano” este artículo examina críticamente varios postulados para establecer su verdadera validez conceptual y su consistencia con las reformas que serian deseables. Se cuestionan “creencias” y “expectativas” sobre temas fiscales, redistributivos y sobre el papel de las “elites”. Para el caso de Colombia se argumenta que gran parte del gasto social, por haber sido “capturado”, por monopolios de oferta y por una estructura perversa de incentivos, es poco redistributivo; donde es mas critico que lo sea, a saber, en generar igualdad de oportunidades iniciales La tesis central es que la ruta para encontrar una compatibilidad de incentivos entre la justicia distributiva, de una parte, y la eficiencia económica, de otra, es a través de asegurar igualdad de oportunidades iniciales por medio de un gasto publico social efectivamente redistributivo. La garantía de oportunidades iniciales es la que da legitimidad política a los resaltados finales. No hay dicotomía excluyente entre desarrollo y equidad. Lo que hay es incompatibilidad entre incentivos individuales e incentivos colectivos o políticos.

A Comparative Social Policy Study on the Structure and Characteristic of Korean Welfare State - Focused on the Development of Public Social Expenditure -

A Comparative Social Policy Study on the Structure and Characteristic of Korean Welfare State - Focused on the Development of Public Social Expenditure -

Revisiting the Welfare State Regime in Korea

Korea's welfare system has undergone radical institutional expansion since the 1990s, largely as a consequence of the financial crisis of 1997. In spite of these changes, however, public social expenditure remains extremely low. As a result, the overall social insurance system and social welfare service sector remain underdeveloped. Thus, the current welfare system in Korea can best be characterized as a residual model, in that state intervention as for provision of welfare remains highly limited and the family and the private market economy play central roles in offering a social safety net.

Foreign investment, international trade and the size and structure of public expenditures

The ‘compensation’ and ‘efficiency’ hypotheses propose that globalization affects both the total, and composition of, public expenditures in different ways. Under the former, economic insecurity leads to expanding public sectors and social expenditures, whereas under the efficiency hypothesis, demands for lower taxes encourage smaller public sectors, and especially ‘privately productive’ spending. We test these hypotheses for a sample of OECD countries from 1980–1997. Using both the inward stock of FDI and openness as measures of globalization we find no effect on the size of government, but FDI significantly shifts the expenditure composition towards social spending, favouring the compensation hypothesis.

Do We Know What Works? A Systematic Review of Impact Evaluations of Social Programs in Latin America and the Caribbean

Poverty is a multidimensional phenomenon closely related to the low accumulation of human capital and scant economic opportunities for the poor. Government efforts to help households overcome poverty require actions on multiple fronts. The governments of Latin-America and the Caribbean are making important efforts to scale up innovative programs to increase the capabilities and economic opportunities of the poor. Increasingly, the implementation of these programs has been accompanied by significant efforts and resources to evaluate their impact and effectiveness. These evaluations have produced many useful lessons. This study reviews a set of rigorous impact evaluations, placing emphasis on extracting lessons to assess the development effectiveness and cost-effectiveness of these interventions. The results presented in this review show a mostly positive picture of the impact of the programs evaluated. Results of the evaluations have also proven to be useful for identifying program weaknesses, such as problems with targeting mechanisms or groups that are not reaping the full benefits of the program, and inducing the adjustments necessary to increase program effectiveness. The evaluation results and the experience in implementing these programs also raise various issues for the reform of social and fiscal policies in order to make public social expenditure more effective, pro-poor, and fiscally sustainable. Scaling up well-targeted programs is key to improving the distributive impact of spending.

Determinants of public education spending in 21 OECD democracies, 1980–2001

This paper focuses on the analysis of determinants of public education spending in OECD countries. It starts out by reviewing and replicating the model presented by Castles (1989, 1998), finding that only a few of his explanatory variables remain significant in a pooled time-series framework. I present an alternative model that contains socio-economic, political, and institutional variables: the level of economic development, the magnitude of demographic demand, the constitutional veto structure, the level of public social expenditures, the degree of tax-revenue decentralization as well as government participation of conservative parties.

Public debt and social expenditure: Friends or foes?

This paper assesses the effects of total public debt on social expenditure using an unbalanced panel of 50 countries between 1985 and 2003. The most robust finding is that higher debt ratios reduce social expenditures. Loans from multilateral organizations do not seem to ameliorate the adverse consequences of debt. Results indicate that defaults may have a direct positive effect on social expenditures. The main policy implication is that to protect social expenditures overindebtedness must be avoided.

The Fiscal Vulnerability of Public Social Expenditures: Is Latin America Different? (La Vulnerabilidad Fiscal Del Gasto Social: ¿Es Diferente América Latina?)

An unbalanced panel data of around fifty countries between 1985 and 2003 is used to estimate the vulnerability of public social expenditures (health and education) to other fiscal variables. The database allows comparisons between Latin America and the rest of developing countries. Public social expenditure is significantly lower in Latin America as share of GDP, although it has a higher share in primary expenditure. Public social expenditures in Latin America are more vulnerable to debt service, but are less sensible to changes in other types of public expenditure. As in other regions in the developing world, public social expenditure in Latin America shrinks when public debt stock increases. This effect is higher with multilateral debt obligations. In Latin America, debt defaults reduce the share of public social expenditures in total primary public expenditure.

Foreign Direct Investment, Tax Competition and Social Expenditure

The aim of this paper is to make a first step towards studying the role of social expenditure and its interaction with corporate taxation in determining the destination of foreign direct investment (FDI) flows. Using panel data for 18 OECD countries and measuring the extent of social welfare policies by the (public social expenditure)/GDP ratio, we find strong support for the conjecture that redistributive social welfare state policies are valued by multinationals as, for instance, they may signal a government's commitment to social stability.

Comparing Child Mortality in Taiwan and Selected Industrialized Countries

This study compares the mortality rates of children in Taiwan with selected industrialized countries, and identifies the explanations of cross-national variations. We ranked all comparison countries by infant mortality rate (IMR) and under-five mortality rate (U5MR). Multiple regression models were used to examine the relationship of child mortality with gross domestic product, national health expenditure, public social expenditure, and Gini coefficient. For 2002, the IMR and U5MR in Taiwan were 6 per thousand and 8 per thousand, respectively, both ranking 20th among 21 industrialized countries. In explaining cross-national differentials in child mortality, we found that Gini coefficient, an indicator of income inequality, was positively associated with IMR and U5MR, and that social expenditure was negatively associated with U5MR. Our study shows that prevention of child mortality in Taiwan has not yet reached the highest attainable standard, and underscores the importance of a fairer income distribution and social investment in child health care.

Demand for Job Protection - Some Clues from Behavioural Economics

The empirical evidence that unemployment is one of the most negative outcomes in life, carrying non-pecuniary psychic costs as well as pecuniary ones, is strong. Yet, standard explanations of the demand for social protection have neglected these costs and their impact on the way in which workers wish protection to be delivered. The paper exploits some clues from behavioural economics to factor these costs into the explanation of the demand for social protection in general and job protection in particular. Building on empirical evidence, we argue that loss aversion and hedonic adaptation may help explaining why workers, either employed or unemployed, ask for job protection and are willing to pay the cost of it. The main conclusion of our analysis is that, for poorly educated workers, job protection is more effective than public social expenditure. As a consequence, we argue that countries with a poorly educated workforce will be more prone to offer protection through job protection rather than public social expenditure, which is exactly what the empirical evidence shows. The paper concludes that flexibility is a behavioural attitude of individuals, which is primarily affected by education, rather than a normative characteristic of labour markets.

Globalization and the welfare state: the same strategies for similar problems?

This paper analyses the recent evolution of public expenditure, social protection expenditure, income inequality and the risk of poverty in the European Union. It argues that some of the pressures derived from globalization have been translated into a relative reduction on the efforts devoted to public expenditure and social protection expenditure compared to growth in the GDP, resulting in a negative impact both on income distribution in the low-income population, and on the risk of poverty. Our hypothesis is that this relative reduction in spending in welfare states has come about through a general dynamic of convergence, albeit with ‘deviant’ cases. The countries that used to allocate the most resources to public expenditure and social protection expenditure are those that have cut back the most, and where income inequality and the risk of poverty have increased the most. Conversely, the countries that used to allocate the fewest resources are those that have increased expenditure and where income inequality and the risk of poverty have fallen the most.

Public Debt and Social Expenditure: Friends or Foes?

This paper assesses the effects of total public debt (external and domestic) on social expenditure worldwide and in Latin America using an unbalanced panel of around 50 countries for the period 1985-2003. The most robust and important finding is that higher debt ratios do reduce social expenditures, as popular opinion holds. This effect comes mostly from the stock of debt and not from debt service payments, indicating that debt displaces social expenditures not so much because it raises the debt burden, but because it reduces the room (or the appetite) for further indebtedness. Loans from multilateral organizations like the World Bank or the Inter-American Development Bank do not seem to ameliorate the adverse consequences of debt on social expenditures. In accordance with popular wisdom, our results indicate that defaulting on debt obligations does help to increase social expenditures. Nonetheless, Latin America is different in some respects. The adverse effects of debt and debt-interest payments are significantly stronger in the region, which makes defaults more beneficial to social expenditures. While many of these conclusions are very heterodox, their main policy implication is not; there is no better way to protect social expenditures than to avoid overindebtedness, especially in Latin America.

Distributional Impacts of Pension Policy in Argentina

Historically speaking, social security systems are a recent development. At the beginning of the twentieth century, there was limited state social intervention in the developed world, and even less in Latin America. A remarkable expansion of “social rights” took place in the second half of the century. By the 1970s most Latin American countries had set up at least some form of old-age protection, while others had already developed a wide welfare network. Public social expenditures grew to represent over 20 percent of the gross domestic product in a number of countries, including Argentina.