To Aid, Insurance, Transfer, or Control: What Drives the Welfare State?

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To Aid, Insurance, Transfer, or Control: What Drives the Welfare State?

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Edward Castronova

Abstract

The paper uses panel data on OECD countries to assess four theories about the forces that generate social spending. The four theories are: Aid: the Welfare State is about helping the poor. Insure: the Welfare State insures the consumption of middle-class voters. Transfer: the Welfare State transfers money to politically-powerful entitled groups. Control: the Welfare State is about controlling the behavior of the underclass. The data give the following grades: Aid D-, Insure C+, Transfer A-, Control D. This assessment is made by regressing the share of social spending in GDP on a vector of country characteristics. The methods involve simultaneous equation fixed-effects models, and they take advantage of some recent innovations in the growth literature involving the treatment of country-level panel data.

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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 281.

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Length: 46 p.
Date of creation: 2002
Date of revision:
Handle: RePEc:diw:diwwpp:dp281

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Find related papers by JEL classification:
H5 - Public Economics - - National Government Expenditures and Related Policies
I3 - Health, Education, and Welfare - - Welfare and Poverty

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Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March. [Downloadable!] (restricted)
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Other versions:
- Aghion, Philippe & Caroli, Eve & Garcia-Penalosa, Cecilia, 1999. "Inequality and economic growth: the perspective of the new growth theories," CEPREMAP Working Papers (Couverture Orange) 9908, CEPREMAP. [Downloadable!]
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Other versions:
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Sinn, Hans-Werner, 1995. " A Theory of the Welfare State," Scandinavian Journal of Economics, Blackwell Publishing, vol. 97(4), pages 495-526, December.
Other versions:
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Becker, Gary S., 1985. "Public policies, pressure groups, and dead weight costs," Journal of Public Economics, Elsevier, vol. 28(3), pages 329-347, December. [Downloadable!] (restricted)
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- Gary S. Becker, 1984. "Public Policies, Pressure Groups, and Dead Weight Costs," University of Chicago - George G. Stigler Center for Study of Economy and State 35, Chicago - Center for Study of Economy and State.
Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, Oxford University Press, vol. 10(3), pages 565-91, September.

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