Income Distribution, Living Standards, and Labor Market Dynamics in Shaping Economic Security: Evidence from G-20 Economies

Tavsif

Economic security, understood as the capacity of an economy to sustain stable material living conditions for its households when adverse shocks occur, has become a central policy concern across the G-20. This paper examines the macroeconomic correlates of economic security in 19 G-20 economies over the period 2000 to 2023, with particular attention to heterogeneity across the security distribution. Economic security is measured by a composite index constructed through principal component analysis from gross domestic savings and the inverse of vulnerable employment, and an augmented index additionally incorporates public social protection expenditure. The empirical strategy combines two- step system generalized method of moments estimation, the augmented mean group and common correlated effects mean group estimators, panel unit root and cointegration tests that allow for structural breaks, and the method of moments quantile regression, thereby addressing dynamic endogeneity, cross-sectional dependence, slope heterogeneity, structural change, and distributional heterogeneity. Income inequality and unemployment are negatively associated with economic security, whereas living standards, labor force participation, and financial development are positively associated with it. The mean group estimates exceed the short-run dynamic coefficients in absolute value, which indicates that these are structural rather than cyclical correlates. The associations are two to three times stronger at the 10th than at the 90th percentile of the index, and the point estimates are roughly twice as large among the emerging as among the advanced members, so that the scope for policy improvement is concentrated in the least secure economies.