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Is Social Protection a Luxury Good?

Author

Listed:
  • Michael Lokshin
  • Martin Ravallion
  • Iván Torre

Abstract

The claim that social protection is a luxury good—with a national income elasticity exceeding unity—has as been influential. The paper tests the “luxury good hypothesis” using newly-assembled data on social protection spending across countries since 1995, treating the pandemic period separately, as it entailed a large expansion in social protection efforts. While the mean income share devoted to social protection rises with income, this is attributable to multiple confounders, including relative prices, weak governance in low-income countries and access to information-communication technologies. Controlling for these, social protection is not a luxury good. This was also true during the pandemic.

Suggested Citation

  • Michael Lokshin & Martin Ravallion & Iván Torre, 2022. "Is Social Protection a Luxury Good?," NBER Working Papers 30484, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30484
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    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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