Is Social Protection a Luxury Good ?

Michael Lokshin, Martin Ravallion and Ivan Torre

No 10174, Policy Research Working Paper Series from The World Bank

Abstract: The claim that social protection is a luxury good—with a national income elasticity exceeding unity—has been influential. The paper tests the “luxury good hypothesis” using newly-assembled data on social protection spending across countries since 1995, treating the pandemic period separately, as it entailed a large expansion in social protection efforts. While the mean income share devoted to social protection rises with income, this is attributable to multiple confounders, including relative prices, weak governance in low-income countries and access to information-communication technologies. Controlling for these, social protection is not a luxury good. This was also true during the pandemic.

Date: 2022-09-13
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Working Paper: Is Social Protection a Luxury Good? (2022)
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