The Fiscal Vulnerability of Public Social Expenditures : Is Latin America Different? (La Vulnerabilidad Fiscal Del Gasto Social: ¿Es Diferente América Latina?)

An unbalanced panel data of around fifty countries between 1985 and 2003 is used to estimate the vulnerability of public social expenditures (health and education) to other fiscal variables. The database allows comparisons between Latin America and the rest of developing countries. Public social expenditure is significantly lower in Latin America as share of GDP, although it has a higher share in primary expenditure. Public social expenditures in Latin America are more vulnerable to debt service, but are less sensible to changes in other types of public expenditure. As in other regions in the developing world, public social expenditure in Latin America shrinks when public debt stock increases. This effect is higher with multilateral debt obligations. In Latin America, debt defaults reduce the share of public social expenditures in total primary public expenditure