Is the Welfare State Relevant for Economic Growth? Evidence for Portugal

In this paper, we describe the evolution of welfare state spending in Portugal in the period 1980–2018 and consider its implications for economic growth. Overall, welfare spending in Portugal increased over this period as a percentage of GDP, but stagnated or even declined in recent years. Our empirical analysis attempts to quantify the contribution of welfare spending to economic growth in that period. We provide a comprehensive robustness check by means of specification-curve analysis. We conclude that the sign of the effect varies with the specification choices, but neither positive nor negative estimates are robust.