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Partisan influence on social spending under market integration, fiscal pressure and institutional change

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  • Herwartz, Helmut
  • Theilen, Bernd

Abstract

In this paper we examine whether partisan influence on social expenditure in the OECD has decreased over the past three decades. We analyze whether a reduced partisan influence is due to more trade openness, larger budget deficits or the creation of new supranational institutions. Our empirical approach distinguishes between the effects on the long-run growth of social expenditures and its short-run adjustment to violations of the long-run equilibrium linking social spending with macroeconomic and demographic trends. We find that partisan motives, indeed, play an important role in the explanation of short-run dynamics in social spending. Left-wing parties are found to spend significantly more than their right-wing counterparts and parties spend more before elections. However, the partisan influence has changed over time. While ideology has lost some of its influence, the electoral cycle has become more important to explain changes in social expenditure. This result should be addressed to a general institutional change that took place in the early 1990s and continued over that decade. While changes in trade openness, indebtedness and budget deficits have not changed the partisan influence on social spending, they are particularly important to explain the short-run dynamics of social spending.

Suggested Citation

  • Herwartz, Helmut & Theilen, Bernd, 2014. "Partisan influence on social spending under market integration, fiscal pressure and institutional change," European Journal of Political Economy, Elsevier, vol. 34(C), pages 409-424.
  • Handle: RePEc:eee:poleco:v:34:y:2014:i:c:p:409-424
    DOI: 10.1016/j.ejpoleco.2013.10.003
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    Cited by:

    1. Fabian Gunzinger & Jan-Egbert Sturm, 2016. "It's Politics, Stupid! Political Constraints Determined Governments' Reactions to the Great Recession," Kyklos, Wiley Blackwell, vol. 69(4), pages 584-603, November.
    2. Patricia Esteve-González & Bernd Theilen, 2014. "European Integration: Partisan Motives or Economic Benefits?," LEQS – LSE 'Europe in Question' Discussion Paper Series 71, European Institute, LSE.
    3. Potrafke, Niklas, 2017. "Partisan politics: The empirical evidence from OECD panel studies," Journal of Comparative Economics, Elsevier, vol. 45(4), pages 712-750.
    4. Bove, Vincenzo & Efthyvoulou, Georgios & Navas, Antonio, 2017. "Political cycles in public expenditure: butter vs guns," Journal of Comparative Economics, Elsevier, vol. 45(3), pages 582-604.
    5. Herwartz, Helmut & Theilen, Bernd, 2017. "Ideology and redistribution through public spending," European Journal of Political Economy, Elsevier, vol. 46(C), pages 74-90.
    6. Liang, Li-Lin & Mirelman, Andrew J., 2014. "Why do some countries spend more for health? An assessment of sociopolitical determinants and international aid for government health expenditures," Social Science & Medicine, Elsevier, vol. 114(C), pages 161-168.
    7. Dilla, Diana, 2017. "Staatsverschuldung und Verschuldungsmentalität
      [Public Debt and Debt Mentality]
      ," MPRA Paper 79432, University Library of Munich, Germany.
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    9. Ftergioti, Stamatia, 2017. "Neighbors and Friends: The Effect of Globalization on Party Positions," MPRA Paper 76662, University Library of Munich, Germany.
    10. repec:bla:kyklos:v:70:y:2017:i:2:p:256-277 is not listed on IDEAS
    11. Chang, Chun-Ping & Lee, Chien-Chiang & Hsieh, Meng-Chi, 2015. "Does globalization promote real output? Evidence from quantile cointegration regression," Economic Modelling, Elsevier, vol. 44(C), pages 25-36.

    More about this item

    Keywords

    Social expenditure; Partisan ideology; Electoral cycles; Public debt; Supranational institutions; OECD panel data;

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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