Is Social Protection a Luxury Good?

Michael Lokshin, Martin Ravallion and Iván Torre

No 30484, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The claim that social protection is a luxury good—with a national income elasticity exceeding unity—has as been influential. The paper tests the “luxury good hypothesis” using newly-assembled data on social protection spending across countries since 1995, treating the pandemic period separately, as it entailed a large expansion in social protection efforts. While the mean income share devoted to social protection rises with income, this is attributable to multiple confounders, including relative prices, weak governance in low-income countries and access to information-communication technologies. Controlling for these, social protection is not a luxury good. This was also true during the pandemic.

JEL-codes: H53 I38 O15 (search for similar items in EconPapers)
Date: 2022-09
New Economics Papers: this item is included in nep-ltv and nep-pbe
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Working Paper: Is Social Protection a Luxury Good ? (2022)
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