Welfare state regimes and social policy resistance to fiscal consolidations

Abstract

We study how welfare states regimes influence the effect of episodes of fiscal consolidations on the four main components of the welfare state: social investment, pensions, healthcare and labour market insurance. Welfare state regimes are associated with distinct social policy legacies that feedback into political competition by shaping the size and influence of different coalitions of constituents. Using data from 1980 to 2014 in 16 OECD countries, we find that labour market insurance is more vulnerable to consolidations in Liberal regimes, while social investments are more resistant to consolidations in Nordic regimes. In the Continental regime, which overlaps with Social Health Insurance systems, healthcare is more resistant to consolidations. Finally, pensions are more resistant to consolidations in the Southern regime. These findings contribute to the study of the comparative political economy of welfare state retrenchment.