Social Expenditure and Competitiveness: Is there any Link?

Abstract

Social policies form a part of every state’s basic economic policy. Many countries implement social policy measures to eradicate social conflicts. A key element of the design of any social measure is its financing. The main sources of financing for social benefits are fiscal policies and borrowing. Social expenditure is a key measure of a state's social policy. Although the exercise of social measures often significantly though indirectly benefits the society of a country, the basic assumption is that it places a certain direct burden on the country’s economy. Research says that social spending helps economic growth. The question is this: to what extent is social spending related to a state’s productivity? This question is critical for one reason in particular. Although social expenditure may be related to inflationary pressures or a slowdown in economic functioning, it may also help long-term economic functioning by stimulating productivity. The macroeconomic degree of productivity is important because the productivity of a state increases its competitiveness. This study will show whether social spending helps improve competitiveness. The methodology applied is ordinary least squares (OLS) multiple regression analysis.