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Wibbels and Ahlquist on Social Security in the Developing World

Abstract:
Despite concerted attention to the causes and consequences of government investment in education, little research has sought to systematically explain the roots and developmental consequences of the single largest category of spending in the developing world: social security. This paper establishes a theoretical framework linking autarkic post-World War II economic strategies in the developing world to the emergence of insurance-based social regimes that emphasize spending on programs like social security. In doing so, the paper has three aims: First, to identify structural factors affecting the choice of internally oriented developmental strategies; second, to link key features of internally-oriented capitalism to the birth and development of social policy regimes; and third, to examine the developmental implications of insurance-based social spending regimes in an era of opening international markets.We argue that a government’s choice of development strategy is conditioned by the size of the domestic market, relative abundance of labor, and land inequality in the context of a closed international trading system. The development strategy in turn shapes the fiscal priority governments place on social insurance. We then claim that large investments in inequitable insurance programs left nations poorly prepared for the opening of international markets that began in the early 1980s. Preliminary empirical analysis finds
support for our argument. Overall, the results suggest that economic policies in the 1960s and 1970s had important implications for the emergence of social policy and that those early outlines are more important than “globalization” in shaping both contemporary social policy and economic outcomes.

Erik Wibbels and John Ahlquist (2007), “Development, Autarky, and Social Insurance,” unpublished paper. Available here.

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