DING, HONG (2012): Economic growth and welfare state: a debate of econometrics.
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This study econometrically test the impacts on economic growth of public social expenditure and its four major components: income support, pension benefits, public health and other social services. I use a two-way fixed effect model for panel data of all OECD nations, which includes most of the determinants of growth in previous growth empirical studies for either cross section or panel data as control variables and check possible endogeneity of the variables of interest: welfare measures by Durbin-Wu-Hausman test. The empirical analysis shows a robust negative correlation between welfare spending rate, pension spending rate and GDP growth. The policy implication of this study is: Despite possible positive impact from some sub-components of government welfare expenditures on social services other than public health, overall the total government public social expenditure has a negative effect on economic growth. The source of this impact is pension spending rate, which has a self-reinforcing effect. The self-reinforced rising pension spending rate slows down economic growth (through inhibiting investment rate and productivity growth), which in the end will make the financing of welfare expenditure unsustainable. To prevent such a crisis, introducing more working-age immigrants, particularly skillful immigrants is a feasible way to deter population ageing, slowing down of economy and eruption of sovereign debt crisis in the long run.
|Item Type:||MPRA Paper|
|Original Title:||Economic growth and welfare state: a debate of econometrics|
|Keywords:||welfare state; economic growth; endogeneity; Durbin-wu-hausman test; pension; ageing population|
|Subjects:||I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I38 - Government Policy ; Provision and Effects of Welfare Programs
H - Public Economics > H5 - National Government Expenditures and Related Policies > H53 - Government Expenditures and Welfare Programs
O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity
|Depositing User:||Hong Ding|
|Date Deposited:||15. Sep 2012 21:05|
|Last Modified:||22. Aug 2015 05:28|
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Economic growth and welfare state: a debate of econometrics. (deposited 27. Jun 2012 23:19)
Economic growth and welfare state: a debate of econometrics. (deposited 30. Jun 2012 22:12)
Economic growth and welfare state: a debate of econometrics. (deposited 27. Jul 2012 13:42)
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- Economic growth and welfare state: a debate of econometrics. (deposited 27. Jul 2012 13:42)
- Economic growth and welfare state: a debate of econometrics. (deposited 30. Jun 2012 22:12)