SOCIAL SPENDING IN LATIN AMERICA 1990-2010: A STUDY OF ITS DETERMINANTS AND A CONVERGENCE ANALYSIS

We study the main economic, demographic and political determinants of social spending in Latin America between 1990 and 2010, applying an autoregressive error correction model with GMM system estimators. Results show that the level of social expenditure and its three categories (education, health and social security) have a long-term relationship with per capita income, trade and capital openness, the primary and secondary enrollment ratio, indirect tax revenues and democracy regimes. In the short-term, social spending is affected by the growth of foreign direct investment inflows, population structure, direct tax revenue, current and capital expenditures and fiscal deficits. We also find a process of beta convergence of countries to different steady states.