Assessment of the social expenditure impact on the economic growth in OECD countries

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Economic growth is exposed to many socio-economic factors that impact both the formation and allocation of resources. The theoretical part of this article discusses studies by various authors on the social expenditure impact on economic growth, the dependence of this influence on selected funding principles and social policy models. In the empirical part, using the Pooled Mean Group (PMG) procedure and the Fixed Effect Model, the impact of social expenditure on the economic growth in OECD countries is determined. An increased focus is put on assessing the long-term impact of the main types of social expenditures (public and private), based on different financing principles (distribution and accumulation), on the economic growth rates both in OECD in general and in the context of countries (based on the Esping-Andersen’s typology) grouped according to social policy models. The following conclusions are drawn: 1) an increase in the share of total social expenditures in the country’s GDP negatively affects economic growth; 2) an increase in the share of private social expenditures in the country’s GDP contributes to economic growth; 3) the obtained indicators of impact assessment are different depending on a social policy model chosen. The analysis is based on OECD panel data for the period 1980–2013.

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    • Table 1. Analysis of the social protection impact on the factors determining economic growth
    • Table 2. Social policy models
    • Table 3. Results of the OECD countries analytical grouping according to the correlation between the share of private social expenditures in the total costs and GDP per capita (average for the years from 1980 to 2013)
    • Table 4. Pooled Regression for the logarithm of real GDP per capita and the logarithm of socio-economic factors
    • Table 5. Fixed Effect Regression for the logarithm of real GDP per capita and the logarithm of socio-economic factors
    • Table 6. Random Effect Regression with for the logarithm of the real GDP per capita and the logarithm of socio-economic factors
    • Table 7. Assessment of the social expenditure impact (public and private) on the economic growth
    • Table 8. Assessment of the social expenditure impact (public and private) on the economic growth
    • Table 9. Assessment of the social expenditure impact (public and private) on economic growth according to social policy models