Social expenditure cyclicality: New time-varying evidence in developing economies |
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| Institution: | 1. Instituto Superior de Economia e Gestão (ISEG), Universidade de Lisboa, Rua do Quelhas 6, Lisboa, 1200-781, Portugal;2. Research in Economics and Mathematics (REM) and Research Unit on Complexity and Economics (UECE), ISEG, Universidade de Lisboa, Rua Miguel Lupi 20, Lisbon, 1249-078, Portugal;3. Economics for Policy and Centre for Globalization and Governance, Nova School of Business and Economics, Universidade Nova de Lisboa, Rua da Holanda 1, Carcavelos, 2775-405, Portugal;4. IPAG Business School, 184 Boulevard Saint-Germain, Paris, 75006, France;1. Department of Economics, Universität Hamburg and GIGA, Von-Melle-Park 5, D-20146 Hamburg, Germany;2. Department of Economics and Business, Aarhus University, Fuglesangs Allé 4, DK-8210 Aarhus V, Denmark;1. Universidad de Alcalá & EQUALITAS, Departamento de Economía, Facultad de CC. Económicas, Empresariales y Turismo, Universidad de Alcalá, Plaza de la Victoria, 2, 28802 Alcalá de Henares, Madrid, Spain;2. Universidad de Alcalá, Departamento de Economía, Facultad de CC. Económicas, Empresariales y Turismo, Universidad de Alcalá, Plaza de la Victoria, 2, 28802 Alcalá de Henares, Madrid, Spain;1. School of Accountancy / Institute of Accounting and Finance, Shanghai University of Finance and Economics, Shanghai, China;2. International School of Business and Finance, Sun Yat-sen University, Guangzhou, China;3. School of Accountancy, Nanjing University of Finance and Economics, Nanjing, China;4. School of Management, Shandong University, Jinan, China;1. College of Economics, Sichuan Agricultural University, 211 Huimin Rd, 611130 Chengdu, China;2. Faculty of Economic Sciences, University of Warsaw, ul. Dluga 44/50, 00-241 Warszawa, Poland |
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| Abstract: | This paper provides a novel dataset of time-varying measures of cyclicality in social spending for an unbalanced panel of forty-five developing economies from 1982 to 2012. We focus on four categories of government social expenditure: health, social protection, pensions, and education. We find that in developing countries social spending has been acyclical over time, with the exception of spending on pensions. However, sample averages hide marked heterogeneity across countries, with many individually showing procyclical behavior in different social spending categories. The use of time-varying measures of social spending cyclicality overcomes the major limitation of previous studies in assessing the drivers of fiscal cyclicality that rely solely on cross-country regressions and, therefore, cannot account for country-specific as well as global factors. Using weighted least squares regressions, we find that the degree of social spending (pro)cyclicality is negatively associated with financial deepening, the level of economic development, trade openness, government size, and political constraints on the executive. |
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| Keywords: | Education Health Panel data pensions Time-varying coefficients Weighted least squares |
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