Political parties, institutions, and the dynamics of social expenditure in times of austerity

The containment of social expenditure growth has been a core issue of public policy in advanced industrial countries since the 1980s and has received much academic attention. Among the most extensively discussed explanatory factors of social expenditure are partisan politics and political institutions, as well as the dependency of the real impact of the former on the latter. The paper distinguishes five competing theoretical perspectives and explores their power to explain the empirical variation of social expenditure dynamics during the period 1982-97 in twenty-one OECD countries. By using an interactive model specification, we show that there is empirical evidence for this conditional effect, albeit it is not thoroughly convincing. In total, the evidence first suggests that the effect of politics on social expenditure is rather limited, and, second, tends to support the 'growth-to-limits' and the 'new politics' perspectives more.