The Effect of Constitutional Commitment to Social Security on Social Expenditure Schemes

Abstract This paper studies the effect of constitutional commitment to social security (CCSS) on different categories of social expenditure. For this purpose, we use a pooled cross sectional database for 17 EU-countries from 1990 till 2012. We run OLS models, 2SLS regression models and the Heckman two step model, using the rigidity of the constitution as instrumental variable to correct for possible endogeneity. A positive effect of constitutional commitment to social security is found on total social expenditure and on all four categories of social security spending: old age and survivor, incapacity, unemployment and active labor market policies (ALMPs). The largest effect sizes, expressed as a percentage of average spending, are found for expenditure on unemployment and ALMPs. This shows that constitutional commitment to social security has the largest effect on social expenditure schemes targeted at people who are perceived as less deserving by the public opinion.