1887

OECD Journal: Economic Studies

  • Discontinued

OECD Journal: Economic Studies publishes articles in the area of economic policy analysis, applied economics and statistical analysis, generally with an international or cross-country dimension. It draws significantly on economic papers produced by the OECD Economics Department, other parts of the OECD Secretariat and the Organisation’s intergovernmental committees.

English

The dynamics of social expenditures over the cycle

A comparison across OECD countries

This paper studies the cyclical behaviour of public social spending in 20 OECD countries observed over the period between 1982 and 2011. In view of the recent discussion on cutting the budget deficit, the paper pays particular attention to whether social spending is pro-cyclical or countercyclical, whether it changes asymmetrically during expansions and recessions and whether the asymmetric changes in social spending contribute to a drift in social expenditures over time. The links between social spending levels and key economic variables, such as economic growth, provide also a useful context for discussing current social expenditure trends. The estimates, based on a system-GMM estimator, suggest that an upward ratchet effect exists. The effect is robust to a large number of alternative specifications.

JEL classification: E32, E62, H50, I00

Keywords: Fiscal policy, economic cycles, social spending, ratchet effect

English

JEL: H50: Public Economics / National Government Expenditures and Related Policies / National Government Expenditures and Related Policies: General; E62: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Fiscal Policy; E32: Macroeconomics and Monetary Economics / Prices, Business Fluctuations, and Cycles / Business Fluctuations; Cycles; I00: Health, Education, and Welfare / General / Health, Education, and Welfare: General
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