The Efficiency in Welfare Expenditure and Economic Growth

Abstract

This paper analyzes the various arguments that support or oppose expansion in social welfare spending. A critical concern is the fear that as welfare expenditure increases, at some point, economic development will decrease. However, increased welfare investment is essential for achieving a welfare state to ensure the optimal growth of the economy and social welfare. OECD (Organisation for Economic Co-operation and Development) countries with a particular welfare regime that efficiently invests welfare spending are regarded as a reference for Korea. In consideration of the environmental factors in each nation, the relative efficiency level of welfare spending is calculated with panel data. It is evident that Koreas investment in social welfare from 2003 to 2007 was inefficient. One way to achieve an appropriate balance between social welfare and economic growth is to lessen the inefficiency of welfare investment.