The impact of intergovernmental relationships on social welfare expenditures in OECD countries

현하영; CHOI， HEUNGSUK

The study of welfare state and welfare policy has generally focused on the role of the central government, with which the state is often equated. However, it is not only the central, but the local government that frequently determine the level of welfare spending, and design and deliver welfare services. With the phenomenon of so called globalization, many parts of public services have been transferred to subnational governments. It highlights the relevance of intergovernmental relations in analyzing the changes in welfare policies. In this paper, we focus on the fiscal and political characteristics of intergovernmental relationships and whether the state is unitary or federal, and analyze the impact of such intergovernmental relationships on the welfare expenditures in OECD countries. We hypotheses that with more fiscal and political decentralization, the local government would spend more on welfare because the heads of local governments, who are concerned with their reelection, would try to reflect citizens’ welfare needs on budget priorities. Also we hypotheses that federal states would spend more on welfare than unitary states because they have more autonomy in public expenditure. We conducted pooled time-series analyses to confirm our hypotheses using the data from OECD, World Bank, and Quality of Government Institute for the period of 1995 to 2005. The test results indeed show that characteristics of intergovernmental relationships influence the level of welfare expenditures.

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