Economic Growth, Public Debt and Social Spending. Should Welfare State Take the Blame?
In this paper we trace the relation between economic growth, public debt and social spending treated as a proxy for welfare state spending in the context of 2008+ crisis in advanced capitalist economies. We focus on the alleged causality between high welfare spending and growing public debt which is often said to have contributed to the current debt crisis experienced by many countries and we elaborate on the often heralded thesis that high social spending leads to low growth levels. By doing so we intend to find out if welfare states can indeed be identified as a source of current fiscal problems and prosperity issues. We perform our analysis on a group of 21 highly developed countries in 1991-2014 period basing on OECD data. Our findings suggest that evidence to support such theses are mixed and rather weak and do not allow for drawing firm conclusions about harmful impact of welfare state on economic performance. On this background we also comment on the usability of statistics and case studies in social sciences. (original abstract)
- Arts W., Gelissen J., Three Worlds of Welfare Capitalism or More? A State-of-the-Art Report, [in:] Ch. Pierson, F.G. Castles (eds.), The Welfare State Reader, Polity Press, London 2006.
- Atkinson A.B., The Economic Consequences of Rolling Back the Welfare State, MIT Press, Cambridge 1999.
- Barr N., Economics of the Welfare State, Oxford University Press, Oxford 2012.
- Calmfors L., Wren-Lewis S., What should fiscal councils do?, "Economic Policy", Vol. 26, No. 68/2011, http://dx.doi.org/10.1111/j.1468-0327.2011.00273.x.
- Castles F.G., Testing the Retrenchment Hypothesis: An Aggregate Overview, [in:] F.G. Castles (ed.), The Disappearing State? Retrenchment Realities in an Age of Globalization, Edward Elgar, Cheltenham 2007.
- Cousins M., European Welfare States. Comparative Perspectives, SAGE Publications, London 2005.
- Gerring J., What Is a Case Study and What It Is Good for?, "American Political Science Review", Vol. 98, No. 02/2004, http://dx.doi.org/10.1017/s0003055404001182.
- Hall P.A., Soskice D. (eds.), Varieties of Capitalism. The Institutional Foundations of Comparative Advantage, Oxford University Press, Oxford 2001.
- Korpi W., Welfare-State Regress in Western Europe: Politics, Institutions, Globalization and Europeanization, "Annual Review of Sociology", Vol. 29, No. 1/2003, http://dx.doi.org/10.1146/annurev.soc.29.010202.095943.
- Lemieux P., American and European Welfare States: Similar Causes, Similar Effects, "Cato Journal", Vol. 33, No. 2/2013.
- Levy J.D., Welfare Retrenchment, [in:] F.G. Castles, S. Leibfried, J. Lewis, H. Obinger, Ch. Pierson (eds.), The Oxford Handbook of the Welfare State, Oxford University Press, Oxford 2012.
- Pierson Ch., Beyond the Welfare State?, Polity Press, London 2006.
- Pierson P., Dismantling the Welfare State? Reagan, Thatcher and the Politics of Retrenchment, Cambridge University Press, New York 1994.
- Pierson P., The New Politics of the Welfare State, "World Politics", Vol. 48, No. 2/1996.
- Reinhart C.M., Rogoff K.S., Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten, IMF Working Paper, Vol. 13, No. 266/2013, http://dx.doi.org/10.5089/9781475552874.001.
- Sindzingre A.N., Institutions as a Composite Concept: Explaining Their Indeterminate Relationship with Economic Development, paper presented at the WINIR Conference "Institutions that Change the World", London-Greenwich 2014.