Research Information System
Business and Management Studies: An International Journal, vol.13, no.2, pp.747-761, 2025 (Peer-Reviewed Journal)
2579AbstractThis study aims to empirically examine the effects of different dimensions of globalisation—general, economic, trade, and financial—on public social expenditures in 17 OECD countries from 2008 to 2019. Emphasis is placed on the economic dimension of globalisation, which is further decomposed into trade and financial subcomponents. This focus is motivated by the fact that economic globalisation encapsulates the most direct market pressures and measurable transmission channels affecting welfare policy. The analysis employs random-effects panel data regressions to assess these relationships while addressing model assumptions through diagnostic testing. The findings indicate that globalisation is positively associated with social spending, supporting the compensation hypothesis, which suggests that states expand welfare provisions to offset the risks of globalisation. Economic globalisation exerts a powerfulinfluence, with financial globalisation driving most of the observed effects. Additionally, social expenditures respond countercyclically to economic growth and unemployment, while higher governance quality is associated with lower relative social spending. Diagnostic tests reveal cross-sectional dependence, heteroskedasticity, and autocorrelation, which are addressed using Driscoll-Kraay standard errors to ensure robustness. The results suggest that globalisation fosters an expansion in social spending as governments adjust to global economic pressures. These findings highlight the evolving role of social policies in mitigating globalisation-induced inequalities and maintaining economic security.By focusing analytically on the economic dimension of globalisation and its subcomponents, this study provides a differentiated contribution to the empirical literature on welfare state adaptation.