Economic and institutional drivers of social welfare expenditure in emerging economies

Abstract

This research examines the economic and institutional factors influencing public social welfare spending in eight emerging countries –Bulgaria, Chile, Colombia, Hungary, Korea, Romania, Poland, and Turkey– over the period from 2010 to 2023. By employing a fixed effects panel regression model with robust standard errors, we assess how employment rates, government consumption, GDP per capita, government effectiveness, regulatory quality, and control of corruption affect levels of social spending. The findings indicate that higher employment rates and enhanced government effectiveness are significantly linked to reduced welfare expenditure, implying that better labor market conditions and administrative competence may lessen the necessity for extensive social support. Conversely, increased government consumption, elevated GDP per capita, stronger regulatory quality, and improved control of corruption show a positive relationship with social welfare expenditure, highlighting that both economic capacity and institutional integrity are vital in increasing public investment in social programs. These results emphasize the need to align macroeconomic policies with institutional reforms to maximize the scale and effectiveness of social welfare spending in emerging economies.