This research article examines the relationship between the level of social welfare expenditure and economic growth rates, based on unbalanced panel data from 38 OECD countries covering the period from 1985 to 2022. Four hypotheses are formulated regarding the impact of social expenditure on economic growth rates. Through multiple iterations of regression model building, employing various combinations of dependent and independent variables, and conducting tests for stationarity and causality, compelling empirical evidence was obtained on the negative influence of social welfare spending on economic growth rates. The study takes into account both government and non-governmental expenditures on social welfare, a novelty in this field. This approach allows for a detailed examination of the effects of different components on economic growth and provides a more comprehensive understanding of the relationships. The findings indicate that countries with high levels of social welfare spending experience a slowdown in economic growth rates. This is associated with increasing demands on social security systems, their growing inclusivity, and the escalating required levels of financing, which are increasingly covered by debt sources. The research highlights the need to strike a balance between social expenditures and economic growth rates and proposes a set of measures to ensure economic growth outpaces the indexing of social expenditures. The abstract underscores the relevance of the study in light of the widespread recognition of the necessity to combat inequality, poverty, and destitution, and calls on OECD countries’ governments to pay increased attention to social policy in order to achieve sustainable and balanced economic growth.

An, J., & Mikhaylov, A. (2020). Russian energy projects in South Africa. Journal of Energy in Southern Africa, 31(3), 58–64. https://doi.org/10.17159/2413-3051/2020/v31i3a7809

An, J., Mikhaylov, A., Jung, S. U. (2020). The Strategy of South Korea in the Global Oil Market. Energies, 13(10), 2491, https://doi.org/10.3390/en13102491

Annabi, N., Harvey, S., & Lan, Y. (2011). Public expenditures on education, human capital and growth in Canada: An OLG model analysis. Journal of Policy Modeling, 33(6), 852–865. https://doi.org/10.1016/j.jpolmod.2011.08.020

Arjona, R., Ladaique, M., & Pearson, M. (2003). Social protection and growth. OECD Economic Studies, 2002(2), 7-45. https://doi.org/10.1787/eco_studies-v2002-art8-en

Balaev, A. (2019). The structure of public spending and economic growth in Russia. Russian Journal of Economics, 5(2), 154–176. https://doi.org/10.32609/j.ruje.5.38705

Baum, S. (1992). Poverty, inequality, and the role of government: what would Adam Smith say? Eastern Economic Journal, 18(2), 143-156.

Blankenau, W. F., Simpson, N. B., & Tomljanovich, M. (2007). Public Education Expenditures, Taxation, and Growth: Linking Data to Theory. American Economic Review, 97(2), 393–397. https://doi.org/10.1257/aer.97.2.393

Cashin, P. (1994). Government Spending, Taxes, and Economic Growth. IMF Working Papers, 94(92), 1. https://doi.org/10.5089/9781451951479.001

Castles, F. G., & Dowrick, S. (1990). The Impact of Government Spending Levels on Medium-Term Economic Growth in the Oecd, 1960-85. Journal of Theoretical Politics, 2(2), 173–204. https://doi.org/10.1177/0951692890002002003

Cullison, W. (1993). Public investment and economic growth. FRB Richmond Economic Quarterly, 79(4), 19-33.

Dao, M. Q. (2012). Government expenditure and growth in developing countries. Progress in Development Studies, 12(1), 77–82. https://doi.org/10.1177/146499341101200105

Devarajan, S., Swaroop, V., & Zou, H. F. (1993). What do governments buy? The composition of public spending and economic performance. The World Bank.

Dissou, Y., Didic, S., & Yakautsava, T. (2016). Government spending on education, human capital accumulation, and growth. Economic Modelling, 58, 9–21. https://doi.org/10.1016/j.econmod.2016.04.015

Dorofeev, M. L. (2023). Comprehensive analysis of the effectiveness of social security regional financial models in Russia based on the DEA method. Voprosy Ekonomiki, 6, 117–137. https://doi.org/10.32609/0042-8736-2023-6-117-137

Ezcurra, R., & Rodriguez-Pose, A. (2009). Decentralization of Social Protection Expenditure and Economic Growth in the OECD. Publius: The Journal of Federalism, 41(1), 146–157. https://doi.org/10.1093/publius/pjp042

Furceri, D., & Zdzienicka, A. (2012). The Effects of Social Spending on Economic Activity: Empirical Evidence from a Panel of OECD Countries*. Fiscal Studies, 33(1), 129–152. Portico. https://doi.org/10.1111/j.1475-5890.2012.00155.x

Gwartney, I., Lawson, R., Holcombe, R. G. (1998). The Size and Functions of Government and Economic Growth. Joint Economic Committee Paper, Washington D.C.

Hansson, P., & Henrekson, M. (1994). A new framework for testing the effect of government spending on growth and productivity. Public Choice, 81(3–4), 381–401. https://doi.org/10.1007/bf01053239

Karlibaeva, R., Yousif, N. B. A., Stepanova, D., et al. (2024). Current analysis of cryptocurrency mining industry. Journal of Infrastructure, Policy and Development, 8(8), 4803. https:////doi.org/10.24294/jipd.v8i3.4803

Kiran, B. (2013). Testing the impact of educational expenditures on economic growth: new evidence from Latin American countries. Quality & Quantity, 48(3), 1181–1190. https://doi.org/10.1007/s11135-013-9828-2

Knobel, A., Chokaev, B., & Mironov, A. (2015). Comparative Analysis of the Effectiveness of Public Spending in the Field of National Defense and Law Enforcement (Russian). SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2624542

Korpi, W. (1985). Economic growth and the welfare state: leaky bucket or irrigation system? European Sociological Review, 1(2), 97–118. https://doi.org/10.1093/oxfordjournals.esr.a036387

Kudrin, A., & Knobel, A. (2017). Fiscal policy as a source of economic growth. Voprosy Ekonomiki, 10, 5–26. https://doi.org/10.32609/0042-8736-2017-10-5-26

Landau, D. L. (1985). Government expenditure and economic growth in the developed countries: 1952?76. Public Choice, 47(3). https://doi.org/10.1007/bf00182148

Lindert, P. H. (2004). Growing public: Social spending and economic growth since the eighteenth century. Cambridge University Press.

Lupu, D., & Nuţă, F. M. (2023). The impact of public education spending on economic growth in Central and Eastern Europe. Economic research-Ekonomska istraživanja, 36(1), 1261-1278.

Mallick, L., Das, P. K., & Pradhan, K. C. (2016). Impact of educational expenditure on economic growth in major Asian countries: Evidence from econometric analysis. Theoretical & Applied Economics, 23(2), 173–186.

McCallum, J., & Blais, A. (1987). Government, special interest groups, and economic growth. Public Choice, 54, 3-18.

Mikhaylov, A. (2021). Development of Friedrich von Hayekʼs theory of private money and economic implications for digital currencies. Terra Economicus, 19(1), 53–62. https://doi.org/10.18522/2073-6606-2021-19-1-53-62

Mikhaylov, A. (2022). Efficiency of renewable energy plants in Russia. Anais Da Academia Brasileira de Ciências, 94(4). https://doi.org/10.1590/0001-3765202220191226

Mikhaylov, A. (2023). Understanding the risks associated with wallets, depository services, trading, lending, and borrowing in the crypto space. Journal of Infrastructure, Policy and Development, 7(2), 2223. https:////doi.org/10.24294/jipd.v7i2.2223

Mikhaylov, A., Dinçer, H., & Yüksel, S. (2023a). Analysis of financial development and open innovation oriented fintech potential for emerging economies using an integrated decision-making approach of MF-X-DMA and golden cut bipolar q-ROFSs. Financial Innovation, 9(1). https://doi.org/10.1186/s40854-022-00399-6

Mikhaylov, A., Dinçer, H., Yüksel, S., et al. (2023b). Bitcoin mempool growth and trading volumes: Integrated approach based on QROF Multi-SWARA and aggregation operators. Journal of Innovation & Knowledge, 8(3), 100378. https://doi.org/10.1016/j.jik.2023.100378

Moiseev, N., Mikhaylov, A., Dinçer, H., et al. (2023). Market capitalization shock effects on open innovation models in e-commerce: golden cut q-rung orthopair fuzzy multicriteria decision-making analysis. Financial Innovation, 9(1). https://doi.org/10.1186/s40854-023-00461-x

Mutalimov, V., Kovaleva, I., Mikhaylov, A., & Stepanova, D. (2021). Assessing regional growth of small business in Russia. Entrepreneurial Business and Economics Review, 9(3), 119-133, https://doi.org/10.15678/EBER.2021.090308

Nordstrom, H. (1992). Studies in Trade Policy and Economic Growth (Monograph No. 30). Institute for International Economic Studies, Stockholm.

OECD. (n.d.). Stat. Dataset: Social Expenditure. Available online: https://stats.oecd.org/viewhtml.aspx?datasetcode=SOCX_AGG〈=en (accessed on 9 May 2023).

Perotti, R. (1994). Income Distribution and Investment. European Economic Review, 38, 827-35.

Perotti, R. (1996). Growth, Income Distribution and Democracy: What the Data Say. Journal of Economic Growth, 1(2), 149-87.

Persson, T., Tabellini, G. (1994). Is Inequality Harmful for Growth? American Economic Review, 84(3), 600-621.

Pigou, A. C. (1936). Mr. J. M. Keynes’ General Theory of Employment, Interest and Money. Economica, 3(10), 115. https://doi.org/10.2307/2549064

Sala-I-Martin, X. (1992). Transfers. Available online: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=226814 (accessed on 9 May 2023).

The World Bank. (n.d.). World Development Indicators. Available online: https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG (accessed on 9 May 2023).

Vang, D. Q. (2022). Impacts of public spending on economic growth in Dong Thap province. VNUHCM Journal of Economics, Business and Law, 6(4), 3589-3599.

Wang, B. (2005). Effects of government expenditure on private investment: Canadian empirical evidence. Empirical Economics, 30(2), 493–504. https://doi.org/10.1007/s00181-005-0245-9

Yumashev, A., & Mikhaylov, A. (2020). Development of polymer film coatings with high adhesion to steel alloys and high wear resistance. Polymer Composites, 41(7), 2875–2880. https://doi.org/10.1002/pc.25583

Zeira, J. (2009). Why and How Education Affects Economic Growth. Review of International Economics, 17(3), 602–614. https://doi.org/10.1111/j.1467-9396.2009.00836.x