CeMPA WP 10/23 - Impact of equity in social protection spending on income

The presence of a significant gap in equity of social protection spending between the high-income countries and the rest of countries included in the study signifies that there is a large potential in improving equity in social protection spending in low- and middle-income countries. [...] We use two indicators of equity in spending that are available for a large number of low- and middle-income countries: (i) the share of social protection spending going to the bottom quintile, and (ii) the ratio of the shares of social protection spending going to the top and bottom quintiles. [...] 2 Review of cross-country studies on the effectiveness and equity of social protection spending Government social spending is a powerful instrument at the disposal of the state for reducing material deprivation and narrowing the gap between the rich and the poor. [...] We start by estimating associations between the outcome variables and each of the covariates, i.e., the country wealth measured by the GDP per capita (Model 1), the size of social protection spending relative to the GDP (Model 2), the share of spending going to the bottom quintile (Model 3) and the ratio of spending going to the top and bottom quintiles (Model 4). [...] In the model for poverty at Int$1.90 a day, the effect of the share of the bottom quintile, however, is statistically significant and similar in terms of size to the one in the model for all countries, while the effect of the size of spending is smaller than in the model for all countries (Figure 2).