Synchronization and cyclicality of social spending in economic crises

Luis Ayala, María Jesús Delgado-Rodríguez () and de Lucas Santos Sonia ()
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María Jesús Delgado-Rodríguez: Universidad Rey Juan Carlos

Empirica, 2022, vol. 49, issue 4, No 9, 1153-1187

Abstract: Abstract This paper expands the analysis of the cyclical characteristics of social spending by providing information on its joint behaviour across OECD countries. With this aim we propose the use of dynamic factor analysis and recursive models to estimate synchronization and cyclicality of social policies within a broad perspective. By considering the synchronization of social spending it is possible to assess the short-run characteristics of the joint response to changes in the economic cycle. We find that synchronization of social spending was only possible for advanced economies, achieving the highest countercyclical stabilization effect during the Global Financial Crisis. Emerging market economies are not able to join the synchronized response, maintaining independent and, in most cases, procyclical stances in the behaviour of their social policies.

Keywords: Social spending; Factor models; Business cycle; Fiscal policy (search for similar items in EconPapers)
JEL-codes: C38 E62 F44 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10663-022-09545-w

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