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Stabilization Effects of Social Spending: Empirical Evidence from a Panel of OECD Countries Overcoming the Financial Crisis in the United States

Listed author(s):
  • Davide Furceri


The aim of this paper is to assess the ability of social spending to smooth output shocks and to provide stabilization. The results show that overall social spending is able to smooth about 16 percent of a shock to GDP. Among its subcategories, social spending devoted to Old Age and Unemployment are those that contribute more to provide smoothing. Moreover, the stabilization effects of social spending are significantly larger in those countries where the size of social spending is higher. The empirical results are economically and statistically significant and robust. Les effets de stabilisation des dépenses sociales : Étude empirique sur un échantillon de pays de l'OCDE L’objectif de ce document est d’évaluer la capacité des dépenses sociales à lisser les chocs sur la production et stabiliser l’économie. Les résultats montrent que le total des dépenses sociales est capable de lisser environ 16 pour cent d’un choc sur le PIB. Au sein des différentes sous catégories, les dépenses sociales relatives aux pensions et au traitement du chômage sont celles qui contribuent le plus au lissage. Par ailleurs, les effets de stabilisation des dépenses sociales sont significativement plus grandes dans les pays où la taille des dépenses sociales est plus élevée. Les résultats empiriques sont économiquement et statistiquement significatifs et robustes.

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 675.

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Date of creation: 25 Feb 2009
Handle: RePEc:oec:ecoaaa:675-en
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