Halyna Yurchyk

National University of Water and Environmental Engineering, Rivne, Ukraine 

E-mail: g.m.urchik@nuwm.edu.ua

ORCID 0000-0003-1013-6940

Social expenditure multiplier: Assessment of economic effect and optimal values

Halyna Mishchuk

Faculty of Economics, Széchenyi Istvàn University, Győr, Hungary 

E-mail: mishchuk.halyna@sze.hu

ORCID 0000-0003-4520-3189

Svitlana Bilan

Rzeszow University of Technology, Rzeszów, Poland

E-mail: s.bilan@prz.edu.pl

ORCID 0000-0001-9814-5459

Marinko Skare

Juraj Dobrila University of Pula, Croatia

E-mail: mskare@unipu.hr

ORCID 0000-0001-6426-3692

Abstract. The main aim of the study is to test the hypothesis that social expenditures are not only a source of social support and budgeting of the social sphere, but can be a significant lever of economic development, provided proper planning of their share and volume. In this regard, the authors have adapted the open-economy multiplier to assess the economic effect of social expenditures. Based on the correlation analysis of the relationship between the share of social expenditures (% of GDP) and the multiplier of social expenditures, conducted on the example of EU countries, two groups of countries are identified depending on the impact of social expenditure multiplier on GDP: the first one embraces those countries that are characterized by a growing economic return from social expenditures; the second one is where the return is declining. To determine the optimal levels of social expenditures, which can be expected to have a positive economic effect in the form of GDP growth, we have identified critical limits of the multiplier of social expenditures according to the principle: the maximum value is seen in the group of countries with positive impact; the minimal one is experienced in countries with inverse dependence of the share of social expenditures and their multiplier. As a result, the experience of financing social expenditures in the EU leads to the conclusion that the optimal share of social expenditures in GDP ranges from 28% to 30% – within these limits multiplier values exceed 1.0, i.e. there is a positive impact of social expenditures on GDP in the form of the growth of economic results over the resources consumed.

Received: January, 2023

1st Revision: June, 2023

Accepted: December, 2023

DOI: 10.14254/2071-789X.2024/17-1/12

JEL Classification: H53, I38, O52

Keywords: social expenditures, GDP, open-economy multiplier, marginal return on social expenditures