Social security expenditure and GDP in OECD countries: A cointegrated panel analysis
Titel:
Social security expenditure and GDP in OECD countries: A cointegrated panel analysis
Auteur:
Lee, Chien-Chiang Chang, Chun-Ping
Verschenen in:
International economic journal
Paginering:
Jaargang 20 (2006) nr. 3 pagina's 303-320
Jaar:
2006-09-01
Inhoud:
Using panel data unit root tests and panel cointegration tests, as well as estimation techniques appropriate for heterogeneous panels such as the full modified OLS, this paper re-examines the long-run co-movement and the causal relationship between GDP and social security expenditure in a bivariate model, employing data on 25 OECD countries from 1980 to 2001. Our cointegration test results show strong evidence in favour of the existence of a long-run equilibrium cointegrating relationship between GDP and social security expenditure after allowing for a heterogeneous country effect. Regarding the panel-based error correction model, we find that GDP and social security expenditure lack short-run causality, but reveal the existence of long-run bidirectional causality. This shows that, in the long run, economic growth must be based on a social welfare policy that should be carried out, and economic growth can facilitate contiguous development in a social welfare policy. Lastly, we also provide evidence to support that social security expenditure can affect growth through the savings and human capital accumulation in OECD countries.
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