Structure of the population or economic conditions? Determinants of spending on social protection in the European Union

Abstract

The paper examines the relationship between dependent variables (spending on social protection and spending on social protection benefits) and variables that capture the economic structure of the population and economic activity on the example of panel data of 26 European Union (EU) countries (except for Bulgaria and Croatia) over the years 2000-2017. In particular, the economic structure of the population is analysed by the age dependency ratio, while economic activity is expressed by the real GDP per capita growth rate and the unemployment rate. Regardless of the estimation technique for specifications with variables transformed to first differences, the results of the study indicate a statistically significant association between the dependent variables and the macroeconomic conditions of the EU countries. By contrast, the relationships between the dependency ratios and the dependent variables are positive but generally statistically insignificant, although EU countries are undergoing advanced processes of population ageing.