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KMID : 1001320170440030189
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Social Welfare Policy
2017 Volume.44 No. 3 p.189 ~ p.215
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A Study on the Effects of Welfare Expenditure on Economic Recession
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Lim Wan-Sub
Park Hyoung-John
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Abstract
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This paper examines the effects of welfare expenditure on the economic recession. We assumed that welfare spending is the determinant of escape from the recession and the factor of stabilization of economy, and tried to find out the effect of explanatory variables on reducing recession period. The Cox proportional hazards model showed that the labor income share, TFP(related to welfare), the Eurozone, and the rate of change in investment expenditure to GDP are statistically significant. Public social spending growth has been shown to reduce the likelihood of escaping from the recession, although it was not statistically significant depending on the model. In addition, the Eurozone countries were less likely to escape from the recession because the Eurozone countries were unlikely to implement their own monetary policies, which means that they were less likely to respond to the economic crisis. On the other hand, as a result of estimating the stabilization effect of welfare expenditure of OECD countries from 1980 to 2015, it was found that welfare spending mitigated the economic shock by 10.3 ~ 12.5%. When the stabilization effect of 1980 ~ 2015 are divided into three periods, stabilization effect of 1980~1991 was larger than other period. However, the stabilization effect during 2004~2015, when the global financial crisis occurred, was larger than 1992~2003. The effect of stabilization of old age and family expenditure increased in recent period.
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KEYWORD
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economic crisis, recession, welfare expenditure, escape from the recession, stabilization effect
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