Partisan influence on social spending under market integration, fiscal pressure and institutional change

Helmut Herwartz and Bernd Theilen ()

European Journal of Political Economy, 2014, vol. 34, issue C, 409-424

Abstract: In this paper we examine whether partisan influence on social expenditure in the OECD has decreased over the past three decades. We analyze whether a reduced partisan influence is due to more trade openness, larger budget deficits or the creation of new supranational institutions. Our empirical approach distinguishes between the effects on the long-run growth of social expenditures and its short-run adjustment to violations of the long-run equilibrium linking social spending with macroeconomic and demographic trends. We find that partisan motives, indeed, play an important role in the explanation of short-run dynamics in social spending. Left-wing parties are found to spend significantly more than their right-wing counterparts and parties spend more before elections. However, the partisan influence has changed over time. While ideology has lost some of its influence, the electoral cycle has become more important to explain changes in social expenditure. This result should be addressed to a general institutional change that took place in the early 1990s and continued over that decade. While changes in trade openness, indebtedness and budget deficits have not changed the partisan influence on social spending, they are particularly important to explain the short-run dynamics of social spending.

Keywords: Social expenditure; Partisan ideology; Electoral cycles; Public debt; Supranational institutions; OECD panel data (search for similar items in EconPapers)
JEL-codes: C22 C23 D72 F13 H53 H87 I18 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:34:y:2014:i:c:p:409-424

DOI: 10.1016/j.ejpoleco.2013.10.003

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