Abstract
The study extends the debate on social spending in the developing world by taking the South Asian Association for Regional Cooperation (SAARC) countries to examine the social policy reactions of democratic and non-democratic regimes to globalization which is one of the main social challenges of sustainable development. This article investigates the impact of globalization and democracy on the aggregate and disaggregates levels of social spending for the selected SAARC countries from the period 1996–2018. The investigation includes how governments react to the challenges of globalization with the welfare policy decisions that are located more toward reducing cost ("efficiency theory") otherwise ensuring individuals' government assistance ("compensation theory"). The results support both the efficiency and compensation thesis depending on which type of globalization indicator is taken under consideration, however, it would be misleading to assume that the efficiency thesis is valid for all developing countries. By using the TSCS data technique on SAARC countries we discovered the impact of globalization on social spending that was supposed to be conditional on regime type. However, the interactive variables reveal an important finding that trade openness tends to increase social spending (the coefficient indicates little systematic effect), and financial openness tends to cut social spending, while democracy of SAARC countries has no significant role or unrelated in counterbalancing these effects. Hence, social spending cannot automatically develop human capital through democratic regime, further SAARC governments are usually in fiscal insolvency that results in allocating most of the resources from budget on debt repayments, leaving a small portion for social-related expenditures.
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Appendix
Appendix
See Tables 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15.
From the result of Model 6 (Table 11—Annexure I), the error correction term (ECT) has a sign negative but is statistically insignificant as the p-value is 0.144, which explains no long-run relationship exists between the variables. Out of 10 variables, 8 variables in the long-run part are statistically significant including the interaction terms of Trade Openness (TO) and Financial Openness (FO) with Democracy (Demo) except lag of Inflation rate Inf and lag of debt which are statistically insignificant. On the other hand, in the short-run all variables are statistically insignificant including two interaction terms. This means education spending has a neither long-run nor short-run relationship between variables.
From the result of Model 7 (Table 12—Annexure I), the error correction term (ECT) has sign positive and is statistically insignificant as p-value is 0.806, which explains no long-run relationship exist between the variables. All variables in long-run as well as in short run are statistically insignificant. This means health spending has neither long-run, nor short-run relationship between variables.
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Hakeem, S., Ghauri, S.P., Ahmed, R.R. et al. Development of Social Welfare Policies in the South Asian Association for Regional Cooperation (SAARC) Countries: Globalization and Democracy. Soc Indic Res 167, 91–134 (2023). https://doi.org/10.1007/s11205-023-03095-9
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DOI: https://doi.org/10.1007/s11205-023-03095-9
Keywords
- SAARC
- Globalization and democracy
- Social welfare
- Social spending
- TSCS techniques
- Efficiency theory
- Compensation theory