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Castronova, Edward
Year of Publication: 
Series/Report no.: 
DIW Discussion Papers 281
The paper uses panel data on OECD countries to assess four theories about the forces that generate social spending. The four theories are: Aid: the Welfare State is about helping the poor. Insure: the Welfare State insures the consumption of middle-class voters. Transfer: the Welfare State transfers money to politically-powerful entitled groups. Control: the Welfare State is about controlling the behavior of the underclass. The data give the following grades: Aid D-, Insure C+, Transfer A-, Control D. This assessment is made by regressing the share of social spending in GDP on a vector of country characteristics. The methods involve simultaneous equation fixed-effects models, and they take advantage of some recent innovations in the growth literature involving the treatment of country-level panel data
Document Type: 
Working Paper

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