Kim, Seonga (2014). 'The Longitudinal Effect of Social Expenditure on Human Development among Developed Countries' Paper presented at the annual conference of the HDCA, 2-5 September 2014, Athens, Greece.
Social Policy aims the good things in the society. To achieve this purpose, governments spend money and human power. What are the good things that the governments should pursue through policy processes?
Economic Growth is, in general, regarded as the goal of the set of public policies, which is defined as annual amount of Gross National Product and its changes. There is, however, a consensus that the economic growth is not the end of development, but tools or means to achieve human development which is deemed as the ultimate goal for social effort. This is based on the idea that the amount of GDP or its change cannot fully explain the degree of societal development and guarantee the sustainability of the society (Stiglitz, et al., 2010). To be specific, the contents of GDP, such as cost caused by increased crime, are veiled.
The leading international organizations suggest alternative theories on growth. Pro-poor Growth proposed by World Bank aims at sustainable economic growth pursuing poverty reduction and income inequality alleviation as well as economic growth (World Bank, 2008). International Labour Organization paints a picture of Wage-led Growth which means balanced growth relieving income polarization and wage share reduction through labour policies (Lavoie and Stockhammer, 2012). International Monetary Fund also investigates the effect of redistribution and inequality on economic growth (Ostry et al., 2014). What is surprising is that these alternative growth theories all put economic growth the base of policy performance despite its drawbacks. After all, what are the real things of the growth?
Sen (1999) points out that the expansion of freedom is the core of development. With this perspective economic growth is the means to achieve goals of social policies as stated above. The reason why GDP or income increase, industrialization, and technical advancement, as narrow definition of development, are required is to expand the range of freedom that people enjoy in real world. Capability Approach is a compilation of the ideas, which gives more weight to life expectancy, literacy, social infrastructure, and income as the indicators of capability.
What government should pursue is to effectively embody the normative values of capability. This guides government to redefine its objective to replace economic growth in order to explain the efficiency of government effort properly and to choose suitable domains to invest a given amount of public resources. UNDP (1990) invented and released Human Development Index, combining the degree of health, education, and income level, as the substitute of GDP.
The effect of government expenditure on human development in several countries has been studied. The degree of policy effort among countries, however, has been converged over geographical proximity and each country varies on the extent of its effect. Stiglitz (2012) proposes political processes and social institutions as main factors which affect different degree of effect of government effort.
In this study, I aim to identify the longitudinal effect of government effort on human development and intermediate effect of political conditions and social institutions among developed countries through hierarchical Linear Model. HLM is evaluated to be proper to identify group effect within nested data, avoiding ecological error. Research model proposed here is following: HD means the degree of human development of the society, social expenditure measures government effort. X is designated for control variables.
HD = β0 + β1social expenditure + β2X + r1
β0 = γ00 + γ01social expenditure + u01
β1 = γ10 + γ11social expenditure + u11