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Social spending as a driver of economic growth: has the theoretical consensus of the 1980s led to successful economic policies?

Sandrine Michel ()
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Sandrine Michel: UMR ART-Dev - Acteurs, Ressources et Territoires dans le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - UM3 - Université Paul-Valéry - Montpellier 3 - UPVD - Université de Perpignan Via Domitia - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique, UM - Université de Montpellier

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Abstract: The question of how this spending affects the economic growth is a question as old as economics. While the 19th century showed their countercyclical growth during the phase of depression of the business cycle followed by ratchet effects when economic context is improving, the 20th century has studied the causes of their growth. Economic causes insist first on the correction on income losses and then introduce causality as regards with the dynamics of capital accumulation. At the end of the 1980s, a new assumption (Lucas 1988, Fontvieille 1990) suggests that social spending would have become a driver of growth. This paper searches to verify this assumption. In order to do so, it focuses on the european pathway of social spending development since the 1960s to 2014. It is shown that insofar as social spending is still sensitive to the two last business cycle phase of depression, the 1980s assumption is not invalidated. But the assumption is not verified for other reasons than the expected ones. While social spending avoiding the fall of income used to be countercyclical, the other ones, dedicated to the production of the quality of the people, are becoming acyclical.

Keywords: Economic History; Social spending; Economic growth; Economic Cycles; Endogeneous growth; Régulation Theory; Europe (search for similar items in EconPapers)
Date: 2018-10-17
New Economics Papers: this item is included in nep-his, nep-hpe and nep-mac
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Published in Alcouffe Alain; Baslé Maurice; Poettinger Monika. Macroeconomic Theory and the Eurozone Crisis, Routledge, 2018, Routledge Studies in the History of Economics, 9780815364047

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