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The volatility impact of social expenditure’s cyclicality in advanced economies

Joao Jalles ()

Economic Analysis and Policy, 2020, vol. 66, issue C, 26-40

Abstract: We present a new dataset of time-varying measures of social spending cyclicality in a sample of 26 advanced countries between 1982 and 2012. More specifically, we focus on five categories of government social expenditure: health, social protection, pensions, education and welfare. Results show that health and education spending is generally acyclical, while pensions are procyclical and social protection and welfare spending are counter-cyclical. That said, sample averages hide serious heterogeneity across countries. Our findings suggest that the higher the degree of countercyclicality of government’s social spending, the lower output volatility will be. Results are robust to several specifications, the use of alternative dependent variables, and estimators (including those accounting for endogeneity).

Keywords: Education; Health; Pensions; Time-varying coefficients; Panel data; Instrumental variables; Institutions (search for similar items in EconPapers)
JEL-codes: C22 C23 H50 H60 H62 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.eap.2020.02.002

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