Determinants of social spending in Latin America during and after the Washington consensus: a dynamic panel error-correction model analysis

Abstract

This paper examines the determinants of social spending in Latin America during the period 1990-2012 and how they differed between the years of the Washington Consensus (1990Consensus ( -2000 and the period that followed (2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011)(2012). Special attention is also paid to the evaluation of convergence towards a common upper-bounded steady state (absolute beta convergence) or to specific steady states conditioned by their country's specific determinants (conditional beta convergence). We estimate a panel error-correction version of an autoregressive distributed lag model to identify the long-term relationships between social expenditure and its determinants. Generalised methods of moments estimators are used to control the endogeneity of the regressors. Results indicate that Latin American social spending follows a conditional beta convergence process over the Washington consensus period that was mainly driven by structural differences in fiscal burdens and external debt, while during the second period it was explained by conjunctural differences in the fiscal burden, GDP per capita and the growth of trade and capital openness.

Mapping Welfare State Development in (post) Neoliberal Latin America

“…Low levels of economic development and democratisation appear to be the main reasons behind the relatively low levels of welfare state development in eight Latin American countries (Cruz-Martinez, 2017a). Martín-Mayoral and Sastre (2017) argues that the fiscal burden and external debt are the main drivers of welfare effortmeasured as social spending -in the Washington Consensus years (1990)(1991)(1992)(1993)(1994)(1995)(1996)(1997)(1998)(1999)(2000), while in addition to the fiscal burden, economic openness and GDP per capita are the main determinants during the pink-tide era (2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011)(2012).…”

Why Is the Accumulation of Knowledge So Hard? Exploring Econometric Research on the Determinants of Public Social Spending in Latin America

“…Unfortunately, their solution does not properly deal with unobserved heterogeneity and may result in biased estimators. These problems are illustrated by Martín-Mayoral and Fernández Sastre (2017), who provide estimates from a variety of techniques, among them pooled and FE OLS. Their results show marked differences between estimated coefficients and corresponding standard errors.…”

Determinants of health and education equality: evidence from post-Soviet states

“…This decision rests on the idea that although these two sectors are pivotal in enhancing citizens' wellbeing, they might be influenced differently by political factors (Amagoh and Bhuiyan, 2010; Huber et al. , 2008; Martín-Mayoral and Sastre, 2017).…”

“…Differently from the work of Altman and Castiglione (2019), I disentangle equality in social policy between healthcare and education sector and consider equality in those sectors separately. This decision rests on the idea that although these two sectors are pivotal in enhancing citizens' wellbeing, they might be influenced differently by political factors (Amagoh and Bhuiyan, 2010;Huber et al, 2008;Mart ın-Mayoral and Sastre, 2017).…”

“…Yet, different from previous studies, I consider equality in those sectors separately for two reasons. First, as the existing literature demonstrates, the determinants of health and education spending are different (Huber et al, 2008;Mart ın-Mayoral and Sastre, 2017). While governments may be motivated to spend more on health due to civil conflicts or older populations, public spending on education may be justified as a programmatic development of the country (Amagoh and Bhuiyan, 2010;Jones et al, 2017;White et al, 2017).…”