Welfare Over Time: Three Worlds of Welfare Capitalism in Panel Perspective

In this paper we analyse the effects, over time, of the liberal (US), corporatist (German) and social democratic (Dutch) welfare states on poverty, inequality and income redistribution 1985–89. Unlike previous international comparisons relying on static frameworks and cross-sectional data, we use panel data from the Dutch Socio-Economic Panel (SEP), the German Socio-Economic Panel (SOEP), and the American Panel Study of Income Dynamics (PSID) — all of which have large samples (15,000+ respondents) and all of which have been running for fully a decade — to compare welfare state performance over one and five years. We find that both the corporatist (German) and especially the social democratic (Dutch) welfare states redistribute income substantially to reduce poverty and inequality, and that in both cases these effects are substantially greater over five years than one. In the social democratic (Dutch) regime very few people have incomes which, taking a five year average, put them below the poverty line. The corporatist (German) regime also turns out to be much more redistributive over five years than would ordinarily be expected. The liberal (US) welfare state, in contrast, is not only much less redistributive on a one-year basis but also no more so over five years than one. There is, however, evidence of efficiency losses in the more ‘generous’ social democratic welfare state, in that fewer people appear to escape poverty through labour markets than in the liberal welfare regime.