Social security expenditure and economic growth: an empirical assessment

In this paper, we analyse the empirical relationship between social security expenditure and economic growth, using cross-country data for a sample of 61 countries and panel data for a sample of 20 industrialized countries. We find that, whenever a statistically significant association between social security expenditure and growth exists, it has a positive sign. The positive estimated coefficient of social security expenditure seems robust to various forms of misspecification and appears to be larger in poor countries with relatively underdeveloped social security systems. As for the channels through which the positive effect of social security expenditure on growth should take place, our results seem to indicate that social security has a positive influence on human capital formation.