The Political Determinants of Social Expenditure in the European Countries

The social expenditure in 30 European countries over the period 1970-2011 is examined, applying static and dynamic panel estimators in order to identify the determinants of social expenditure. After a brief introduction and a survey of the economic literature on this issue, we discuss the data and briefly introduce the applied methodologies. Empirical results, in line with previous researches, suggest that real per capita GDP growth, unemployment rate, general government consolidated gross debt, and openness to trade have a direct impact on real social expenditure. Moreover, some political factors, such as government fragmentation, political globalization, and democracy degree contribute to explain the variability of social expenditure. It is found that higher growth is associated with less expenditure: Granger causality analysis reveals mixed results, and only four countries of our sample exhibit a unidirectional flow running from economic growth rate to social expenditure.