Can Social Protection Expenditures Cushion the Inequality Effect of Globalization?

This paper examines whether social expenditure cushions the effect of globalization on within-country inequality, and whether this relationship varies across OECD and non-OECD countries. Using several measures of social protection from OECD and the World Bank, we analyze separately the role of education, health, and welfare expenditure. The results confirm previous findings that economic globalization — especially trade flows — associates with higher income inequality, while social expenditure sometimes seems to reduce inequality. We find no evidence that various kinds of social protection expenditure moderate the adverse effect of globalization on inequality