Social expenditures
Alexey Mikhaylov
Special Issue Information
The objective of this SI is social expenditures. The funding of social support programs in economic thought has been an extremely contentious issue, debated for centuries. Redistributing a portion of the income of high-income individuals through the fiscal system in favor of socially vulnerable groups of citizens is considered by some scholars as economically justified investments, ensuring social stability in the short and medium term. Furthermore, such investments can be seen as high-yield investments, positively impacting long-term economic growth by enhancing the quality of the average human capital in the economy.
At the same time, the opposing viewpoint argues against excessive fiscal redistribution and excessive social spending. This perspective maintains that increasing income redistribution in economies may have long-term adverse effects by stifling labor initiatives and entrepreneurial activity, reducing risk-taking propensity, and impeding the pace of innovation adoption in the non-governmental sector of the economy. In theory, all of these factors are likely to inevitably slow down the pace of economic growth, as high marginal tax rates and a large volume of budgetary transfers to the population, particularly without means-testing and targeting of these transfers, can significantly negatively impact the productivity of both high-income and low-income groups of citizens.This discussion largely takes place in the context of solving issues related to eradicating poverty and overcoming the financial hardships of the population. The modern context for debates in this area revolves around transitioning social security systems to financial models based on a universal basic income. In the 21st century, experiments are being conducted in which researchers attempt to empirically justify the impact of universal or unconditional payments on the recipients' motivation for work and personal development. Additionally, they seek to determine the extent to which these recipients' dependency on budgetary transfers may evolve in the long term.