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Synchronization and cyclicality of social spending in economic crises

Author

Listed:
  • Luis Ayala-Cañón

    (UNED)

  • María Jesús Delgado-Rodríguez

    (Universidad Rey Juan Carlos)

  • Sonia De Lucas-Santos

    (Universidad Autónoma de Madrid, C/ Francisco Tomás Y Valiente)

Abstract

This paper expands the analysis of the cyclical characteristics of social spending by providing information on its joint behaviour across OECD countries. With this aim we propose the use of dynamic factor analysis and recursive models to estimate synchronization and cyclicality of social policies within a broad perspective. By considering the synchronization of social spending it is possible to assess the short-run characteristics of the joint response to changes in the economic cycle. We find that synchronization of social spending was only possible for advanced economies, achieving the highest countercyclical stabilization effect during the Global Financial Crisis. Emerging market economies are not able to join the synchronized response, maintaining independent and, in most cases, procyclical stances in the behaviour of their social policies.

Suggested Citation

  • Luis Ayala-Cañón & María Jesús Delgado-Rodríguez & Sonia De Lucas-Santos, 2022. "Synchronization and cyclicality of social spending in economic crises," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(4), pages 1153-1187, November.
    • Handle: RePEc:kap:empiri:v:49:y:2022:i:4:d:10.1007_s10663-022-09545-w
    DOI: 10.1007/s10663-022-09545-w
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    More about this item

    Keywords

    Social spending; Factor models; Business cycle; Fiscal policy;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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