Social Security Program-iman Sufrian

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Review JournalSocial Security in Developing Countries: Myth or Necessity? Evidence from

ndia!y "atricia Justino

Source: "R#S $"overty Research #nit at Susse%& wor'ing paper no( )*

Septem+er )**,

Reviewed +y man SufrianN"M -)*.,-,/01

2( !2C34R5#ND6N7R5D#C75R8

The introductory paragraph summarizes the background information and purpose of the

research (specific questions the study researched).

System of socioeconomic security started in Europe in the late 19th century and

gradually implemented in most countries in the early 20 th century. The aim of the

social security programs in its early era were:

• as a means of improving the well-eing of the poor!

• To reduce ine"uality within society!

• To conciliate different social demands thus avoiding the social and political conflicts#

which necessarily arose as capitalists forms of production evolved in the

industriali$ed countries.

The influential social security programs were the %S 19&' Social Security (ct and

social security program implemented in the %) summari$ed in 19*2 +everidge

,eport. Those two social security programs were used to define modern form of

social security programs as defined y /. / defined social security as the

protection which society provides for its memers through a series of pulic measure

against the economic and social distress that otherwise would e caused y the

stoppage or sustantial reduction of earnings resulting from sicness# maternity#

employment inury# invalidity and death! the provision of medical care! and the

provision of susidies for families with children 3/# 194*5.

The oectives of social security programs in its early era remained relevant with its

oectives in its later implementation.

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There were controversies regarding the adoption and implementation of modern

form of social security programs in developing countries. Those who disagreed with

the adoption and implementation of modern form of social security programs in

developing countries elieved that the adoption and implementation of modern form

of social security programs were difficult and even unviale ecause of several

following reasons:

• The modern social security systems re"uired sophisticated forms of targeting and

monitoring that would very e6pensive and e financially unfeasile in poorer

economies since governments in developing countries# in general# had less

capacity to collect ta6es 3low level of income5# education and infrastructure.

• 7olitical pressure against the implementation social security polices was often high in

developing countries as such policies may imply some form of redistriution

Therefore# researchers that supported this idea suggested that poverty alleviation

and social-economic security of the poor should e rather achieved through

sustained economic growth that would raise the standard of living of the whole

population 3+runo# ,avallion and S"uire# 199'! 8ollar and )raay# 20005.

n contrast# the supporters of the idea of adopting and implementing social security

programs in developing countries stated that although economic growth was an

important factor in the promotion of etter standards of living# poverty could persist

due to the inaility of some population groups to participate in the growth process

3aiha and )ularni# 19445. Therefore# social security programs were still needed to

protect those who were vulnerale groups against contingencies and uncertainties.

mplementation of social security programs to targeted groups# supported y pulic

participation and careful integration of social and economic policies could play an

important role to maintain the living standards and the well-eing of the most fragile

groups in the population 3henery et (. 19;*! 8re$e and Sen # 19915. +y targeting

the programs to certain group and pulic involvement in the programs made the cost

of implementing the programs ecame "uite small 38re$e and Sen# 19915. Therefore

the "uestion should not focus on whether or not the government in developing

countries should implement the social security programs. The "uestion would e

what type of social security policy should e implemented in developing countries.

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The purpose of this paper were to try to discuss aout the importance of social

security policies in developing economies and to discuss the viaility of implementing

systems of social protection in developing countries.

!( ME795D5548

Then, explain the methods that were used to investigate the research questions (use past tense).

(uthors of this paper conducted a wide literature review aout the history of social

security programs and the theory of social security program. +ased on the literature

review# the authors of this paper then constructed an econometric model to

investigate the research "uestions using the panel data of 1* maor ndian states

from 19;& to 1999 as its case study. Suse"uently# the author drew conclusion

ased on the result of empirical analysis of ndia<s data.

C( J5#RN2 C5N7EN7

ention the ma!or results of the study (use past tense).

"tate what the author of the study learned.

+ased on the literature review conducted y the author of this article# it was clearly

shown that the author of this article supported the implementation social security

program in developing economies. =owever# the design and implementation of social

security programs in developing economies had to tae into account three

fundamental issues have to e address. +urges and Stern 319915 identified those

issues as the following:

• >hat is included within the oectives of the social security programs?

• >ho will e the target@eneficiaries of the social security programs?

• >ho should provide the social security programs?

7he o+;ectives of social security programs in developing countries

The oectives of social security programs in developing countries concerned with

the reducing vulneraility and unacceptale level of deprivation. =owever# since the

e6tent of poverty in most developing countries were much greater than those in more

developed countries# the typical social security enefits implemented in developed

countries are too costly. Therefore# the focus of the social security policies in

developing countries should e on the reduction and mitigation of structural forms of

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vulneraility and on the implementation of ways of coping with all types of ris

3Aorton# onway and Boster# 2001# )aeer 20025 and e integrated within the

overall development strategy of the country rather than implemented as individual

programmes 3)aeer 20025.

The social security programs in developing countries should aim to protect and to

promote oth human and physical capital. 7olicies that protected human capital

include etter access to clinics# hospitals# etter nutrition# etter health support#

health insurance policies# improve access to schools# universal primary education

and so forth.

7hysical capital can e protected y policies aimed at employment creation#

promotion of rural development# research and incentives to encourage laour

intensive investments# etter access to housing and land# improved infrastructure#

reduction of remoteness of some population groups# measures to eliminate iases

against women and other vulnerale groups as producer and consumers#

implementation of employment support schemes# provision of secure ownership of

ey assets# crop insurance measure# etc.

The success of these policies would e improved if the government also implement

sound macroeconomic management policies that aims to eep inflation low# to

promote sustainale growth# to eep low unemployment and to eep alance of

payment at a sustainale level.

7he +eneficiaries of social security programs in developing countries

Social security policies implemented in developing countries should e targeted

toward the needyC# vulnerale groups of the population. 3Dhavala# 19945. The

author of this paper elieve that addressing the needy rather than the worers will

guarantee more efficient cost of social security programs and politically feasile

since this formulation will not e opposed y the more powerful loy groups.

7he provider of social security in developing countries

n developing countries informal arrangement of social security have played a vital

role. The informal arrangement of social security is provided y oth families and

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communities. =owever# this traditional form of family and communal arrangement

were gradually disappearing as a conse"uence of socio-economic moderni$ation

and increasing urani$ation# while no other form of social organi$ation was replacing

the old one 3>orld an 199*5. Therefore# pulicly provided social protection policies

were a natural solution.

The "uestion is then how much the state is willing to intervene in order to provide

social protection to vulnerale memers of society?

"otential +enefits of social security in developing countries

The author of this paper also mentioned aout the potential enefits of social

security programs in developing countries. Those enefits were:

• 8emand enefits

(ccording to urphy et al 319945# internal demand can change as a response to

more e"ual distriution of income. ncreases in the income of the poor will lead to

a wealthier middle class# which are consumers of manufactured goods.

Therefore# redistriutive policies are liely to induce an increase in private

consumption and conse"uently# an enlargement of internal marets and higher

prospect for economic growth.

• =uman capital and staility enefits

Social protection policies may also improve the access of poor individuals and@or

groups to ade"uate health care and education. This# in turn# will improve their

chance to access more prosperous life opportunities and to access etter os

and etter incomes 3Saint-7aul and Ferdier# 1992# alor and Geira 199&# 7erotti

199&5.

Society as a whole will enefits as well# ecause wealthier# etter educated and

healthier populations may reduce social discontent# which# in turn may reduce crime

level# violence and other forms of socio-political instaility caused y the persistence

of poverty amongst certain population groups# o insecurity and other socio-

economic ris 3(lesina et al 1992# (lesina and 7erotti 1992# ,iero and Aune$

19995.

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Social protection policies can generate positive e6ternalities on the economic growth

process in developing economies# in the form of larger internal marets#

accumulation of human capital and more stale socio political environment.

Social Security programs in ndia

The author of this paper used ndia as a case study to support the viaility of

implementing social security programs in developing economies.

n ndia# the poorest individuals elonged to minority religious and ethnic groups#

lower castes# women and those living in remote locations with limited access to

productive assets and institution and employed in secure os 3)aeer# 2002#

)hrisna# 200&5.

E6penditure on social services in ndia had een very small in comparison to other

developing countries. (n important pillars of ndia<s social security policies was the

food programs# implemented in late 19H0s and integrated within a wider rural poverty

alleviation scheme. This comined a large program for land reforms and the

introduction of new technologies and crops in the agriculture# rural employment

scheme# designed to address the unemployment prolems of landless# and the rural

development program targeted towards the creation of assets for the landless.

ater in 199'# the government of ndia introduced an all- ndia protective type social

security scheme which is called Aational Social (ssistance 7rogramme 3AS(75. This

program covers a national policy for social assistance enefits to poor households in

the case of old age# death of person who support his@her family and maternity. This

program has three main components: the national old age pension scheme# the

national family enefit scheme and the national family enefit scheme and the

national maternity enefit scheme. This program received fund from national udget

in the 2000-2001 fiscal year.

Empirical 2nalysis

This paper e6amined the empirical effects of pulic e6penditures on social services

on oth the growth performance of the ndia<s economy and the incomes of the poor.

7overty in ndia halved etween the earlier 19;0s and the late 1990s. n the same

period# ndia<s real per capita 87 has more than douled etween 19;0 and 1999.

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8uring 19;0s# the real 87 growth was slow# and then accelerated in the 1940s and

1990s.

The relationship etween e6penditure on social services and rural poverty is positive

in 19;& data. This coefficients suggested that# in 19;&# states with larger

e6penditures on social service were also those with the highest level of rural poverty.

This relationship changed in 1999# where the correlation ecame negative although

not statistically significant.

The economic effects of social service e6penditure in ndia seemed to e stronger

for aggregate income and consumption e6penditure. This was shown y the positive

and statistically significant correlation in oth 19;& year and 1999 year. This

correlation suggests that e6penditure on social services has had important social

and economic effects in ndia during the three decades oserved.

+ased on panel analysis# it was concluded that e6penditure on social services had

had positive and statistically significant effect on the reduction of poverty and the

increase of income growth and consumption e6penditure in ndia. t was shown that

the immediate effect of social security e6penditure is to decrease economic growth

and increase poverty 3these coefficients were not statistically significant5. n the

longer term# e6penditure on social services had contriuted toward the increase the

economic growth in ndia and the decrease oth rural and uran poverty.

The effects of social service e6penditure on consumption e6penditure were more

immediate and oth current and lagged coefficients for e6penditure on aggregate

income may e caused y the immediate negative impact education has on the state

income# which might delay the economic enefits of social security policies. The

immediate effect of education on consumption e6penditure was positive suggesting

that consumption e6penditure may e "uicer to reflect social development progress

that aggregate income.

The incomes of the poor are affected y the levels of unemployment in the economy.

ncreased levels of unemployment individuals were associated with the decrease in

the growth rates of consumption e6penditures in the uran sector. =owever# higher

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unemployment had a large and positive effect on the reduction of oth rural and

uran poverty. This was seen as a contradictory effect that might e associated with

the payment of unemployment enefits.

Binally # the larger levels of economic openness had a positive impact on oth

income and consumption e6penditures. The variale s also associated with the

reduction of poverty in ndia<s uran sector. Eventhough# not statistically significant#

the coefficient for openness had a positive impact on the level or rural poverty n

ndia# which may suggest the e6istence of ine"ualities in the distriution of the

enefits of recent economic reform. This issue may merit further research in future

paper.

D( S#MM2R8

#nclude a summary as well as your own analysis and evaluation of the article.

$now the article thoroughly.

%o not include personal opinions.

&e sure to distinguish your thoughts from the author's words.

ocus on the positive aspects and what the author(s) of the study learned.

ote limitations of the study at the end of the essay*

o %o the data and conclusions contradict each other+

o #s there sufficient data to support the author's generalizations+

o hat questions remain unanswered+

o -ow could future studies be improved+

(nalysis and Evaluation of the article

+ased on aove parts# it can e concluded that the article has provided an ade"uate

literature review to provide framewor on the history and the theory of social security

programs. The paper also provide relevant literature to support the implementation of

social security programs in developing economies. Burthermore# in order to

strengthen the notion of implementation social security program in developing

economies# the author use the case study of ndia using panel data of 1* maor state

in ndia from 19;& to 1999.

8



The empirical result from ndia<s data support the author<s view that the e6penditures

of social security program has a positive and significant correlation to aggregate

income an aggregate e6penditures of the targeted groups 3the poor5. The empirical

result from ndia<s data also shows that the e6penditure of social security programs

plays significant role in reducing poverty level in ndia. This conclusion is shown from

the negative and significant correlation etween the social security e6penditures and

poverty level from 19;& to 1999.

=owever# there are several important notes that would e valuale for the readers of

this paper. Those are as follows:

• The author mentioned aout further development of social security programs in

ndia following the previous social security program launched in the late 19H0s.

The program was launched in 199' and it was called AS(7. =owever# the

program received provision on the national udget in 2000-2001. The author

used the panel data starting from 19;& data to 1999. This means the further

development of social security programs launched in 199' is not relevant with the

author<s analysis.

• There is no clear conclusion that the e6perience in ndia can e generali$ed to

other developing economies due to different structural characteristic in other

developing economies. Burther research on other developing economies would

e valuale to ensure the e6perience in ndia can e generali$ed

• The author# also include the level of economic openness in the model. The

empirical result shows that economic openness had a positive impact in reducing

poverty level in uran area. =owever# the economic openness had a negative

impact in recuding poverty level in rural area. The author# suggest the e6istence

of ine"uality etween uran and rural area in receiving enefit of the openness of

the economy in ndia. This would e a valuale future research topic.

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RE<ERENCES

=olcome# ,andall ! Soel# ,ussell S.# onsumption e6ternalities and economic

welfare#C Eastern Economic Journal ! Spring 2000! Fol 2H Ao. 2! 1';.

7indyc# ,oert S.! ,uinfeld# 8aniel .# Microeconomics 3&rd edition5# 7rentice =all#

199H#

Farian# =al ,.# Intermediate Microeconomics – A Modern Approach 3Bifth Edition5#

>. >. Aorton I ompany# Aew Jor-ondon# 1999.

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Social Security Program-iman Sufrian