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Social cyclicality in Asian countries

Deepti Ahuja (Department of Business Environment, Indian Institute of Management Rohtak, Rohtak, India)
Venkatesh Murthy (Indian Institute of Management, Rohtak, Rohtak, India)

International Journal of Social Economics

ISSN: 0306-8293

Article publication date: 11 September 2017

260

Abstract

Purpose

The purpose of this study is to examine the cyclical pattern of social expenditure during 1980-2012 for a set of Asian countries. The extant literature available so far has captured the cyclicality of fiscal policy only for member countries of the Organization for Economic Co-operation and Development and for Latin American countries. Moreover, previous studies have largely ignored Asian countries.

Design/methodology/approach

The analysis used panel data from global macro-databases of the International Monetary Fund, Statistics of public expenditure for economic development and Asian Development Bank. The cyclical components of social spending (health, education, and social protection) and GDP were determined by using the Hodrick-Prescott Filter. A positive (negative) correlation indicates procyclical (countercyclical) fiscal policy. In line with the existing literature on fiscal cyclicality (Gavin and Perotti, 1997; Lane, 2003; Frankel et al., 2013) that has examined the behavior of fiscal policy over the business cycle, regression analysis is used to examine the impact of political and institutional factors on the behavior of social spending.

Findings

It was found that government social expenditure is procyclical across Asian countries during 1980-2012. However, during the past decade, emerging Asian countries have been able to shift from procyclical to countercyclical social spending. This shows that they had taken several initiatives to boost expenditure in the social sector – be it in social protection, health, or education services. The significant determinant of social cyclicality is the quality of institutions, which could help the government to increase fiscal deficit during recessions and repay the debt during economic booms. However, to some extent, their countercyclical action is restrained by the high accumulated level of public debt.

Originality/value

In the context of the Asian region, it is important to understand the cyclical pattern of social policy for several reasons. It has been said that crises offer an opportunity for countries to rethink their social policy to achieve more sustained and equitable development. By studying the social spending behavior, the authors can see whether Asian countries were able to grab the opportunity for reshaping their social and economic agenda after the Asian financial crisis.

Keywords

Citation

Ahuja, D. and Murthy, V. (2017), "Social cyclicality in Asian countries", International Journal of Social Economics, Vol. 44 No. 9, pp. 1154-1165. https://doi.org/10.1108/IJSE-04-2016-0112

Publisher

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Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

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