The drawbacks of welfare effort in measuring social spending trends

Abstract

The welfare effort (social spending as a percentage of GDP) has conventionally been the preferred measure for comparisons in space and time of the level of development of welfare states. However, frequent mentions are made in the relevant literature of the drawbacks of this measure as an empirical reference (e.g. it can be demonstrated that in certain conditions it provides a distorted picture of the relative levels of development of social protection systems). This study sets out to determine the extent of the shortcomings of the welfare effort measure for quantifying the relative standards of social protection.