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The causes of welfare state expansion: deindustrialization or globalization?

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  • Iversen, Torben
  • Cusack, Thomas R.
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    Abstract

    An influential line of argument holds that trade exposure causes economic uncertainty and spurs popular demands for compensatory and risk-sharing welfare state spending. The argument has gained renewed prominence through the recent work of Garrett (1998) and Rodrik (1997; 1998). This paper argues that the relationship between trade openness and welfare state expansion is spurious, and that the engine of welfare state expansion since the 1960s has been deindustrialization. Based on cross-sectional time-series data for 15 OECD countries we show that there is no relationship between trade exposure and the level of labor market risks (in terms of employment and wages), whereas the uncertainty and dislocations caused by deindustrialization have spurred electoral demands for compensating welfare state policies. Yet, while differential rates of deindustrialization explain differences in the overall size of the welfare state, its particular character -- in terms of the share of direct government provision and the equality of transfer payments -- is shaped by government partisanship. The argument has implications for the study, and the future, of the welfare state that are very different from those suggestedin the trade openness literature. -- In vielen einflußreichen Diskussionsbeiträgen wird die Meinung vertreten, daß die Liberalisierung des Handels ökonomische Verunsicherung zur Folge habe und damit zu Forderungen nach ausgleichenden wohlfahrtsstaatlichen Ausgaben führe. Die Arbeiten von Garrett (1998) und Rodrik (1997;1998) verliehen diesem Argument zusätzliche Relevanz. Gegenstand dieser Untersuchung ist die Beziehung zwischen Ausmaß an Offenheit einer Volkswirtschaft und der Ausdehnung des Wohlfahrtsstaates, dessen großzügige Entwicklung seit den 1960er Jahren durch zunehmende Deindustrialisierung ermöglicht wurde. Auf der Grundlage von Analysen länderübergreifender Zeitreihen und von 15 OECD-Ländern wird gezeigt, daß kein Zusammenhang zwischen einer Handelsliberalisierung und dem Grad der Arbeitsmarktrisiken (bezogen auf Löhne und Beschäftigung) besteht. Angesichts der durch die Deindustrialisierung verursachten Unsicherheit kommt es jedoch von seiten der Wähler zu Forderungen nach einer ausgleichenden Sozialpolitik. Während das Ausmaß der Deindustrialisierung die Größe und Ausstattung des Wohlfahrsstaates determiniert, wird sein spezifischer Charakter - hinsichtlich der direkten Regierungsdienstleistungen und der ausgleichenden Transferzahlungen - von den Regierungsparteien geprägt. Diese Argumentation ist von großer Tragweite für die Analyse und Zukunft des Wohlfahrtsstaates; sie weicht gravierend von der Literatur über offene Volkswirtschaften ab.

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    Bibliographic Info

    Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Economic Change and Employment with number FS I 98-304.

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    Date of creation: 1998
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    Handle: RePEc:zbw:wzbece:fsi98304

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    1. Garrett, Geoffrey, 1995. "Capital mobility, trade, and the domestic politics of economic policy," International Organization, Cambridge University Press, vol. 49(04), pages 657-687, September.
    2. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
    3. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135.
    4. Ramana Ramaswamy & Bob Rowthorn, 1998. "Growth, Trade, and Deindustrialization," IMF Working Papers 98/60, International Monetary Fund.
    5. Gordon, Robert J., 1989. "Comments 'political and economic determinants of budget deficits in the industrial democracies' by N. Roubini and J.D. Sachs," European Economic Review, Elsevier, vol. 33(5), pages 934-938, May.
    6. Iversen, Torben, 1998. "Wage Bargaining, Central Bank Independence, and the Real Effects of Money," International Organization, Cambridge University Press, vol. 52(03), pages 469-504, June.
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    Cited by:
    1. Kemmerling, Achim, 2001. "Die Messung des Sozialstaates: beschäftigungspolitische Unterschiede zwischen Brutto- und Nettosozialleistungsquote," Discussion Papers, Research Unit: Labor Market Policy and Employment FS I 01-201, Social Science Research Center Berlin (WZB).
    2. Berthold, Norbert & Stettes, Oliver, 2000. "Globalisierung und Strukturwandel - droht das Ende des Sozialstaates," Wirtschaftswissenschaftliche Beiträge 35, Julius-Maximilians-Universität Würzburg, Lehrstuhl für Volkswirtschaftslehre, insbes. Wirtschaftsordnung und Sozialpolitik.

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