Social Dominance

28 Pages Posted: 18 Apr 2018

See all articles by Ludger Schuknecht

Ludger Schuknecht

Bundesministerium der Finanzen

Holger Zemanek

University of Leipzig - Institute for Economic Policy

Date Written: February 21, 2018

Abstract

Based on the observation of an unabated trend towards higher social spending ratios in advanced countries, the study analyzes the risk of “social dominance”, where social expenditures dominate fiscal policy, and undermine growth and fiscal sustainability. We scrutinize this risk by analyzing drivers of social expenditures and their interaction with other fiscal variables. Results show, that social expenditure expansion is largely ageing driven, it crowds out other primary expenditures and there is evidence of unsustainability. These findings and the accelerating trend of population ageing and particularly high political costs to reforming social expenditure suggest significant and rising risks of “social dominance”.

Keywords: fiscal policy, social expenditures, political economy, crowding out, fiscal sustainability

JEL Classification: E620, H300, H550

Suggested Citation

Schuknecht, Ludger and Zemanek, Holger, Social Dominance (February 21, 2018). CESifo Working Paper Series No. 6894. Available at SSRN: https://ssrn.com/abstract=3164036

Ludger Schuknecht

Bundesministerium der Finanzen ( email )

Detlev-Rohwedder-Haus
Wilhelmstrße 97
Berlin, D-10117
Germany

Holger Zemanek (Contact Author)

University of Leipzig - Institute for Economic Policy ( email )

Institute for Economic Policy
Grimmaische Strasse 12
Leipzig, 40109
Germany

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