Economic globalization and the welfare state in affluent democracies, 1975-2001

Abstract

Previous scholarship is sharply divided over how or if globalization influences welfare states. The effects ofglobalization may be positive causing expansion, negative triggering crisis and reduction, curvilinear contributing to convergence, or insignificant. We bring new evidence to bear on this debate with an analysis of three welfare state measures and a comprehensive array of economic globalization indicators for 17 affluent democracies from 1975 to 2001. The analysis suggests several conclusions. First, state-of-the-art welfare state models warrant revision in the globalization era. Second, most indicators of economic globalization do not have significant effects, but a few affect the welfare state and improve models of welfare state variation. Third, the few significant globalization effects are in differing directions and often inconsistent with extant theories. Fourth, the globalization effects are far smaller than the effects of domestic political and economic factors. Fifth, the effects of globalization are not systematically different between European and non-European countries, or liberal and non-liberal welfare regimes. Increased globalization and a modest convergence of the welfare state have occurred, but globalization does not clearly cause welfare state expansion, crisis, and reduction or convergence. Ultimately, this study suggests skepticism toward bold claims about globalization's effect on the welfare state.