Globalization, Domestic Politics and Social Spending in Latin
This paper analyzes the impact of globalization on social spending in Latin America. It shows that trade integration has a consistently negative effect on social security expenditures, and that this effect is compounded by higher integration into capital markets. The importance of political institutions is also key. Popularly-based governments tend to increase social security transfers, which reach a relatively small but politically powerful constituency in the formal sector. By contrast, the change to democracy increases education and health spending, which reaches a larger segment of the population.
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