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The Fiscal Vulnerability of Social Public Expenditure: Is Latin America Different?

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  • Eduardo Lora

Abstract

This paper uses a panel of 50 countries for the period 1985-2003 to evaluate the vulnerability of public social spending (on education and health) to fiscal variables and public debt in Latin America as compared with the rest of the developing world. Social spending is significantly lower in Latin America (although it absorbs a larger proportion of primary spending) and is more vulnerable to higher debt interest payments but less affected by variations in other public spending. As in other developing countries, social spending declines as public debt increases, and more so if the debt is with multilateral banks. Unlike the rest of the world, when Latin American fails to meet its debt payments, social spending declines as a share of total public spending.

Suggested Citation

  • Eduardo Lora, 2007. "The Fiscal Vulnerability of Social Public Expenditure: Is Latin America Different?," Research Department Publications 4505, Inter-American Development Bank, Research Department.
    • Handle: RePEc:idb:wpaper:4505
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    References listed on IDEAS

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    1. Dany Jaimovich & Ugo Panizza, 2010. "Public debt around the world: a new data set of central government debt," Applied Economics Letters, Taylor & Francis Journals, vol. 17(1), pages 19-24, January.
    2. Eduardo Lora, 2007. "Public Investment in Infrastructure in Latin America: Is Debt the Culprit?," Research Department Publications 4502, Inter-American Development Bank, Research Department.
    3. Reza Baqir, 2002. "Social Sector Spending in a Panel of Countries," IMF Working Papers 2002/035, International Monetary Fund.
    4. Lora, Eduardo & Olivera, Mauricio, 2007. "Public debt and social expenditure: Friends or foes?," Emerging Markets Review, Elsevier, vol. 8(4), pages 299-310, December.
    5. Mahdavi, Saeid, 2004. "Shifts in the Composition of Government Spending in Response to External Debt Burden," World Development, Elsevier, vol. 32(7), pages 1139-1157, July.
    6. Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
    7. Dany Jaimovich & Ugo Panizza, 2010. "Public debt around the world: a new data set of central government debt," Applied Economics Letters, Taylor & Francis Journals, vol. 17(1), pages 19-24, January.
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