Do Social Transfers Slow Growth?

Abstract

The effect of government social transfers on economic growth is a hotly contested topic among economists, politicians, and the public at large. Various empirical studies provide evidence both for and against their economic value. This paper finds a negative relationship between social transfers and the growth rate of GDP per capita in 22 advanced economies over 30 years. Various econometric concerns cast doubt on the findings and provide justification for further investigation in future studies.