Public expenditures and the risk of social dominance

Ludger Schuknecht and Holger Zemanek ()
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Holger Zemanek: Federal Ministry of Finance

Public Choice, 2021, vol. 188, issue 1, No 5, 95-120

Abstract: Abstract Based on the observation of an unabated trend towards higher social spending-to-GDP ratios in advanced countries, the study analyzes the risk of social dominance, a situation in which social expenditures dominate fiscal policy and undermine economic growth and fiscal sustainability. We examine that risk by analyzing drivers of social expenditures and their interactions with other fiscal variables. The results show that social expenditure growth largely is population ageing driven and crowds out other primary expenditures; we also find evidence of fiscal unsustainability. The findings, along with the accelerating ageing of populations and exceptionally high political costs of reforming social expenditures suggest significant and rising risks of social dominance.

Keywords: Fiscal policy; Social expenditures; Political economy; Crowding out; Fiscal sustainability (search for similar items in EconPapers)
JEL-codes: E62 H30 H55 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:pubcho:v:188:y:2021:i:1:d:10.1007_s11127-020-00814-5

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DOI: 10.1007/s11127-020-00814-5

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