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Economic growth, public debt and social spending. Should welfare state take the blame?

Author

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  • Slawomir Czech

    (Katowice University of Economics)

  • Magdalena Tusinska

    (Katowice University of Economics)

Abstract

In this paper we trace the relation between economic growth, public debt and social spending treated as a proxy for welfare state spending in the context of 2008+ crisis in advanced capitalist economies. We focus on the alleged causality between high welfare spending and growing public debt which is often said to have contributed to the current debt crisis experienced by many countries and we elaborate on the often heralded thesis that high social spending leads to low growth levels. By doing so we intend to find out if welfare states can indeed be identified as a source of current fiscal problems and prosperity issues. We perform our analysis on a group of 21 highly developed countries in 1991–2014 period basing on OECD data. Our findings suggest that evidence to support such theses are mixed and rather weak and do not allow for drawing firm conclusions about harmful impact of welfare state on economic performance. On this background we also comment on the usability of statistics and case studies in social sciences.

Suggested Citation

  • Slawomir Czech & Magdalena Tusinska, 2016. "Economic growth, public debt and social spending. Should welfare state take the blame?," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 15(1), pages 33-45, March.
    • Handle: RePEc:cpn:umkeip:v:15:y:2016:i:1:p:33-45
    DOI: 10.12775/EiP.2016.003
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2015. "Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 2(4), pages 5-17, June.
    2. A. B. Atkinson, 1999. "The Economic Consequences of Rolling Back the Welfare State," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011719, December.
    3. Lars Calmfors & Simon Wren-Lewis, 2011. "What should fiscal councils do? [Fiscal policy when monetary policy is tied to the mast]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 26(68), pages 649-695.
    4. Barr, Nicholas, 2012. "Economics of the Welfare State," OUP Catalogue, Oxford University Press, edition 5, number 9780199297818.
    5. Gerring, John, 2004. "What Is a Case Study and What Is It Good for?," American Political Science Review, Cambridge University Press, vol. 98(2), pages 341-354, May.
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    Cited by:

    1. Alin -Vasile STRÄ‚CHINARIU, 2021. "The Impact Of Macroeconomic Indicators On Public Debt Dynamics," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(23), pages 1-9.

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    More about this item

    Keywords

    welfare state; political economy; retrenchment; idiosyncrasy;
    All these keywords.

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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