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Social Welfare Expenditure, Human Capital, and Economic Growth: Evidence from Taiwan

Author

Listed:
  • Chien-Chiang Lee

    (Department of Applied Economics, National Chung Hsing University, Taiwan)

  • Chun-Ping Chang

    (Department of Business Administration, Shih Chien University, Kaohsiung Campus, Taiwan)

Abstract

Can extending social welfare expenditures promote economic growth? This issue has been discussed extensively, with some research pointing to net benefits while others find a net negative impact. Insight can be gained by careful analysis of several sub-questions. For example, for two countries with the same social welfare expenditures, will increased social welfare expenditures in one lead to different economic growth rates? What is the channel by which such expenditures impact economic growth? What is the function of social welfare expenditures? This paper adopts simultaneous equations with three-stage least squares to investigate the relationships among social welfare expenditures, human capital, and economic growth using data on Taiwan between 1952 and 2003. We find that accumulated human capital is a critical channel linking social welfare expenditures to economic growth. Consequently, we provide a new perspective on the value of social welfare policy when government resources are limited. This view is consistent with empirical evidence that shows two countries may have identical social welfare expenditures but exhibit different economic growth rates.

Suggested Citation

  • Chien-Chiang Lee & Chun-Ping Chang, 2007. "Social Welfare Expenditure, Human Capital, and Economic Growth: Evidence from Taiwan," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 3(2), pages 225-247, July.
    • Handle: RePEc:jec:journl:v:3:y:2007:i:2:p:225-247
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    Cited by:

    1. Yi-Hsing Liao & Pih-Shuw Chen & Teng-Sheng Sang & Chia-Hsuan Tseng, 2020. "Does Client Importance Matter to Book-Tax Differences?," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 10(5), pages 1-17.

    More about this item

    Keywords

    social welfare expenditure; human capital; economic growth; three-stage least squares;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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