Essay 9: Does Universality Increase Budgets and Thus Reduce the Need for Prioritizing the Needy?

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Social protection is not the only sector with high-priority needs. Gaspar et al. (2019) calculate that to cover the costs of the Sustainable Development Goals related to health, education, electricity, roads, water, and sanitation (but not including social protection) would take on average about 4 percentage points of GDP in emerging markets, but 15 percentage points of GDP in low-income countries. They consider that increasing the tax-toGDP ratio by 5 percentage points of GDP in the next decade is an ambitious but reasonable target in many developing countries, leaving a large gap between plausible resources and high-priority needs. This suggests that there will be fierce competition for resources among high-priority expenditures and thus highlights the importance of the political economy that shapes those decisions.

The battle for fiscal space is not easy. It is rarely easy to raise taxes, and there are pressing needs for many good purposes. Thus, the question of whether to target to conserve resources or to raise more revenue to allow broader social protection programs is perennial.

Essay 9: Does Universality Increase Budgets and Thus Reduce the Need for Prioritizing the Needy?

In the discourse on the political economy of budgets, taxes, and targeting, “more for the poor is less for the poor” has become something of a mantra. An important source of support for the idea is the median voter theory, which postulates that voters will vote for programs that benefit them directly. Thus, a program for a minority such as “the poor” will garner little political support, while one that extends benefits to the middle class or universally will garner enough votes to have much larger budgets. The analytical underpinnings of the argument have been developed by serious scholars (Gelbach and Pritchett 1997; Meltzer and Richard 1981). Several country-specific explorations of some aspects of the theory support it. Jacques and Noel (2018) provide one of the supportive cross-country findings for OECD countries. Taylor-Gooby’s (2005) study is an example of the single-country literature. Looking at public opinion in the United Kingdom, he finds that there is broader support for the universal National Health System than for targeted social schemes. The argument has gained currency among institutions that advocate for social protection, such as the International Labour Organization, the United Nations Children’s Fund, HelpAge International, the Global Coalition for Social Protection Floors, and Development Pathways. The idea seems to be so widely accepted that this chapter does not include a full literature review of support (see UNICEF–ODI 2020).

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The optimism that high coverage will yield many votes and thus large budgets is intuitive and appealing since it removes the budget constraint that is the impetus for targeting, but it may be that the catchy phrase oversells the idea. Thus, the following paragraphs consider whether the simple idea and phrase reflect the complexities of the world and empirical evidence.

Empirical research has not found strong support for the median voter theory and its central implication about redistribution. Casual observation reveals that no country has legislated a fully tax-financed and ongoing universal basic income program,18 much less one sufficient to prevent poverty (Gentilini et al. 2019). Even fully universal (purely age-based) child allowances exist in only 21 countries (UNICEF–ODI 2020) and universal (purely age-based) social pensions in 19 countries (HelpAge 2018). Milanovic (2000) offers a cogent review of the cross-country literature to that date and its mostly unsupportive findings. Milanovic uses more specialized data that began to become available from the newly emerging detailed and harmonized household surveys. He finds some support for greater redistribution where factor income inequality is higher but less support for the specifics of the mechanism of the median voter theory. Acemoglu et al. (2015) provide a detailed literature review and empirics on the expected relationship between democracy, greater redistribution, and lower inequality and why the expected relationships may not be realized. A particularly useful treatment by Coady, D’Angelo, and Evans (2019), using EUROMOD data, finds that when fiscal progressivity in tax-transfer systems is higher (for example, spending is more targeted), fiscal effort (spending) is somewhat lower but not to an extent that offsets the effects of the redistribution (the systems cost a bit less but deliver more to the poor).

Voters may support a program for reasons that go beyond the short-term self-interest at the crux of median voter theory, which would imply that support would be wider than coverage in any given year. It may be that voters will support not only programs that benefit themselves in the year of voting, but also programs that promise coverage applicable to others of concern to the voter, such as poorer relatives, neighbors, or co-workers. Or voters may support a program for which they may not qualify at present but might need in the future if they face misfortune.19 Or they may support a social contract that includes some sort of destitution prevention but wish to pay as little as possible for it. Klemm and Mauro (2021) report that in the United States, those who lost employment, suffered from COVID-19, or personally knew someone who had are more likely to support progressive taxation.

Giuliano and Spilimbergo (2014) show that those who lived through an economic depression in youth/early adulthood favor redistribution more strongly than those who did not. Alesina and Guiliano (2009, 2011) note

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that a spell of unemployment can increase support for redistribution, and being African American (and thus part of a structurally disadvantaged group) does so more. Costa-Font and Cowell (2015) and Haggard, Kaufman, and Long (2013) take a wider look at social identities and how they interact with immediate economic self-interest to shape attitudes toward redistribution. They find that identities other than income/class influence support for redistribution. And for a sample of 34 countries in the European Social Survey, Olivera (2015) notes that religiosity (irrespective of which religion) is associated with stronger preferences for redistribution. Nowack and Schoderer (2020) show a mild, positive association between the strength of egalitarian values held by voters across countries and the share of universal social policies within social policy constructs. Similarly, Alesina and Glaeser (2004) and Graham (2002) find that support for redistributive policy is higher in countries where more people believe that poverty is due to structural causes or “luck” than individual effort or “laziness.” Definitions of “deservingness” seem to matter for the sorts of programs that may garner support. For example, van Oorschot (2006) and van Oorschot and Roosma (2015) note that there are some regularities across Europe where support for the old and sick/disabled is higher than that for the unemployed or migrants.

It is important to consider policy making processes. Very rarely are voters able to vote on each policy individually (direct democracy) as assumed by the median voter theory. Rather, voters elect candidates or parties that represent composites of positions on many issues (representative democracy). Moreover, even in established democracies, policy making processes are not as egalitarian as the one-person-one-vote process at the ballot box. Various sorts of political participation increase with income (see Karabarbounis [2011] for evidence from the World Value Surveys in advanced OECD countries, or Harms and Zink [2003]). And voters are not the only voices. As van Oorschot and Roosma (2015) explain, many relevant groups—such as politicians, policy makers, administrators, street-level bureaucrats, representatives of interest groups, and experts—have opinions and may shape policy directly or through mass media discussions and portrayals of different target groups.

Framings of electoral processes that do not assume direct democracy suggest a less arithmetic link between the breadth of coverage and voter support. Alessina and Glaeser (2004) posit that differences between Europe’s more universal and generous welfare state and the United States’ more narrowly focused and smaller one stem from different forms of democracy (proportional versus majoritarian and the role of checks and balances in the Constitution), economic history, and the degree of racial and ethnic homogeneity. Iversen and Soskice (2006) also model and test how redistribution is differentially supported by proportional versus

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majoritarian systems of democracy, finding more redistribution in proportional representation systems. Hickey et al. (2018) anchor their multicountry studies of the political economy of social protection in Africa on the “political settlements” framework, where the settlements are both between various factions of the elite and between the elite and nonelite. The importance of electoral politics can be low, depending on its chance of bringing about regime change. In turn, elite commitment to social assistance may stem from its ability to bolster the legitimacy of the regime in delivering on promises—for example, with respect to inclusive growth or poverty reduction.

Other writings on the political economy of social protection programs focus not just on how narrow or broad their client population is but also on other framing or design factors. Hickey et al. (2018) discuss the role of ideas and the link between the framing or program design and world views— especially around concerns about “handouts” and “dependency,” but also recognizing collective responsibility for categories such as the elderly and deserving poor, including working-age adults and their dependents in times of drought. World Bank and DFAT (forthcoming) remind that social protection can be viewed in a variety of ways—as charity/costs; as an economic investment in poverty reduction, human capital, or productivity; as a part of the social contract; or as a justiciable right. These different views presumably imply different terms of support among voters or elites. The study also examines how design features of targeting, conditionality, and modality of transfer can shape support. Bossuroy and Coudouel (2018) pick up a similar theme, stressing the two-way interaction between social policy and politics. They articulate how program design features can garner support—not just for eligibility, but around conditionalities, recertification processes, productivity focus, and grievance and redress mechanisms. Davis et al. (2016) show how impact evaluation, especially when national actors are closely involved, can bolster the credibility of programs, strengthen the case for social protection, and address concerns about dependency or undesirable use of funds. And de Janvry et al. (2005) show that in Brazil, mayors facing reelection had an electoral advantage if the implementation of the Bolsa Escola program had no publicized errors of inclusion and/or had established local accountability councils, but they were not penalized for errors of exclusion (which were not under direct mayoral control as the budget was rationed by the federal government).

Better understanding of the nuances and variations in the response function between policy design and budgets could be a major contribution to social policy formulation. Meanwhile, policy makers are finding their way through their locally pertinent political environment with different salience given to social protection overall and to different programs or their features within the overall social protection system; different degrees of