Impact of export product concentration on social protection expenditure Does trade openness matter?

Purpose This study investigates empirically the impact of export product concentration (or diversification) on social protection expenditure in both developed and developing countries. The analysis further explores whether this effect depends on countries' degree of openness to international trade. Design/methodology/approach The analysis has relied on an unbalanced panel data set comprising 112 countries over the period 1980-2010 and used the two-step system generalized methods of moments (GMM) estimator as the econometric approach. Findings The empirical analysis conveys two messages. First, low-income countries experience a positive effect of export product concentration on social protection expenditure, while for relatively advanced economies, export product diversification positively influences social protection expenditure. Second, countries that further open up their economies to international trade experience a positive effect of export product diversification on social protection expenditure, with the magnitude of this impact increasing as the degree of openness rises. Research limitations/implications - These findings highlight the relevance of export product diversification for social protection expenditure in both developed and developing countries, notably in the context of greater trade openness. Practical implications - The diversification of export products is one means for developed and developing countries alike to increase the scope for social protection expenditure. Originality/value To the best of the authors' knowledge, this topic had not been addressed.