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Table 2 Estimated error-correction model: long-run and short-run dynamics of social expenditure and its determinants

From: Determinants of social spending in Latin America during and after the Washington consensus: a dynamic panel error-correction model analysis

Explanatory variables 1990–2012 1990–2000 2000–2012
(1) (2) (3) (4) (5) (6) (7)
OLS FE PCSE Differenced GMM System GMM System GMM System GMM
Social expenditure (t − 1) − 0.0338** (0.0133) − 0.269*** (0.0616) − 0.0394*** (0.0110) − 0.299*** (0.0378) − 0.0989*** (0.0204) − 0.190*** (0.0433) − 0.104*** (0.0186)
Fiscal burden (t − 1) 0.0340* (0.0185) 0.103 (0.0704) 0.0388 (0.0299) 0.107* (0.0587) 0.0363 (0.0293) 0.120** (0.0572) 0.0403 (0.0307)
Fiscal burden growth 0.0927 (0.0770) 0.0941 (0.0644) 0.100 (0.0755) 0.0906 (0.0661) 0.0871* (0.0510) 0.0541 (0.0722) 0.135** (0.0598)
Per capita income − 0.0105 (0.0109) − 0.238* (0.117) − 0.00928 (0.0184) − 0.169** (0.0846) − 0.00159 (0.0168) 0.0294 (0.0322) 0.0191 (0.0228)
(GDPpc) (logged) (t − 1)
Per capita income growth 0.0990 (0.222) − 0.0245 (0.272) 0.0955 (0.195) − 0.0170 (0.177) 0.0625 (0.142) 0.449* (0.250) − 0.402*** (0.143)
Trade (% GDP) (t − 1) 0.00187 (0.0130) − 0.0334 (0.0473) 0.00294 (0.0110) − 0.0354 (0.0365) − 0.00278 (0.0115) 0.00932 (0.0166) − 0.00247 (0.0164)
Trade growth − 0.0999* (0.0495) − 0.123*** (0.0408) − 0.102 (0.0776) − 0.115** (0.0573) − 0.112** (0.0454) − 0.0610 (0.0633) − 0.163*** (0.0592)
Foreign direct investment flows (%GNI) (t − 1) 0.00452 (0.00403) 0.00780** (0.00362) 0.00506 (0.00726) 0.000822 (0.00864) 0.00857 (0.00734) 0.0216 (0.0154) 0.0120 (0.00758)
Foreign direct investment growth 0.0203** (0.00934) 0.0159* (0.00875) 0.0202** (0.00939) 0.0121 (0.00780) 0.0200*** (0.00661) 0.0325*** (0.0112) 0.0155** (0.00728)
External debt (%GNI) (t − 1) − 0.0239** (0.00996) − 0.0353* (0.0190) − 0.0253 (0.0185) − 0.0567*** (0.0189) − 0.0328** (0.0141) − 0.0841** (0.0346) − 0.0104 (0.0184)
External debt growth − 0.0138 (0.0253) 0.0138 (0.0324) − 0.0107 (0.0471) − 0.00987 (0.0372) − 0.0103 (0.0303) − 0.0879* (0.0496) 0.0375 (0.0358)
Interest payments on debt (t − 1) 0.0154 (0.0134) − 0.0165 (0.0180) 0.0148 (0.0130) − 0.0204 (0.0155) 0.00860 (0.00999) − 0.0169 (0.0219) 0.00616 (0.0114)
Interest payments on debt growth − 0.0351 (0.0202) − 0.0391 (0.0231) − 0.0328 (0.0239) − 0.0380** (0.0156) − 0.0270** (0.0127) − 0.0308 (0.0211) − 0.0122 (0.0140)
Unemployment (t − 1) − 0.0291** (0.0114) − 0.0552** (0.0224) − 0.0285 (0.0222) − 0.0346 (0.0261) − 0.0247* (0.0130) 0.00379 (0.0235) − 0.0390** (0.0176)
Unemployment growth − 0.0126 (0.0548) − 0.00875 (0.0486) − 0.00943 (0.0392) 0.00749 (0.0312) 0.00531 (0.0248) 0.0263 (0.0340) 0.0106 (0.0314)
Population over 65 (t− 1) 0.0109 (0.0300) 0.394** (0.176) 0.0118 (0.0197) 0.233 (0.194) 0.0375 (0.0300) − 0.0147 (0.0502) 0.0150 (0.0410)
Population over 65 growth − 0.671 (0.804) − 0.953 (0.710) − 0.718 (0.739) − 0.744 (0.972) − 0.538 (0.711) − 2.793 (2.118) − 0.329 (0.644)
Democracy (t− 1) − 0.0306** (0.0119) − 0.0400* (0.0194) − 0.0304** (0.0133) − 0.0531*** (0.0196) − 0.0265** (0.0114) 0.0337* (0.0202) − 0.0558*** (0.0158)
Democracy growth − 0.0534* (0.0301) − 0.0408 (0.0277) − 0.0508* (0.0303) − 0.0438* (0.0256) − 0.0351* (0.0208) − 0.0440 (0.0271) 0.00137 (0.0259)
Right-wing party (t − 1) 0.00689 (0.0100) 0.0312 (0.0274) 0.00644 (0.0108) 0.0222 (0.0208) 0.00383 (0.00978) − 0.0359* (0.0185) 0.00852 (0.0109)
Right-wing party growth − 0.00516 (0.0269) 0.0222 (0.0201) − 0.00503 (0.0362) 0.0164 (0.0269) 0.00525 (0.0209) − 0.0441 (0.0318) 0.0138 (0.0252)
Constant 0.327** (0.137) 2.219** (1.036)    0.272* (0.162) 0.248 (0.283) 0.152 (0.245)
Observations 349 349 349 325 349 163 186
R2 0.210 0.333 0.204     
R2 adjusted 0.108 0.246      
Variance inflation factor (VIF) (mean) 2.61       
ar1p     0 0 0 0
ar2p     0.824 0.844 0.442 0.271
Sarganp     0.00451 0.334 0.133 0.153
Difference in Sargan      0.612 0.490 0.238
  1. Periods 1990–2012, sub-periods 1990–2000 and 2001–2012. GMM system estimates
  2. We use as instruments the lagged levels of social expenditures, GDPpc, unemployment fiscal burden and external debt (dated t − 2 and earlier) in the first-differenced equations for the first differenced GMM estimator. For the system GMM estimator, lagged first differences of the endogenous variables (dated t − 2 and earlier) are used as additional instruments in the level equations. Year dummies are included in each model (not shown). Asymptotically robust standard errors are reported in parentheses. ***p < 0.01, **p < 0.05, *p < 0.1