The Social Protection Engel Curve

Abstract

Why do richer countries spend a higher share of their income on social protection than poor countries? A newly assembled dataset on social protection spending for 142 countries since 1995 allows an exploration of alternate hypotheses, treating the pandemic period separately, as it entailed a large expansion in social protection efforts. While the mean income share devoted to social protection rises with income, this is attributable to multiple confounders, including relative prices, weak governance in low-income countries, and access to information-communication technologies. Controlling for these, social protection spending is similar between rich and poor countries. This was also true during the pandemic.