Are Public and Private Social Expenditures Complementary?
International Advances in Economic Research, Volume 11, Number 2, pp. 175-189
Research Memorandum Department of Economics Leiden University 2004.01
Posted: 18 Jul 2009
Date Written: 2005
Most analyses of social protection are focussed on public arrangements. However, social effort is not restricted to the public domain; all kinds of private arrangements can be substitutes to public programs. OECD-data indicate that accounting for private social benefits has an equalising effect on levels of social effort across a number of countries. This suggests complementarity between public and private social expenditures. But their distributional effects differ. Using cross-country data, we find a negative relationship between net public social expenditures and income inequality, but a positive relationship between net private social expenditures and income inequality. We conclude that changes in the public/private mix in the provision of social protection may affect the redistributive impact of the welfare state.
Keywords: public/private-mix, social protection, income distribution
JEL Classification: D3, H22, H55
Suggested Citation: Suggested Citation