Globalisation and the Welfare State: Novel Questions, Mechanisms, Methods and Data

Abstract

In the last 20 years the effects of globalization on the welfare state in OECD countries have been widely discussed and analyzed. Despite the large number of studies on globalization and the welfare state, important questions are still unsolved. From a theoretical point of view, we know on the one hand that different aspects of globalization such as economic competition and migration flows influence the welfare state differently. On the other hand, we know that the effects of globalization vary across welfare state programs (e.g. unemployment benefits, pensions, etc.). However, we know very little about why and how different dimensions of globalization affect different welfare state programs in a different way. A further aspect that is underdeveloped is the role of the domestic conditions. For example, it is plausible that in countries with high inequality or weak labor market institutions, the negative effects of globalization on social policies are less mitigated than in other countries. Lastly, we need more work that provides micro foundations that link globalization to policy changes. In terms of methods, many studies use expenditure data as main indicator for social policies. However, the selection of the indicator influences the results. This raises the question whether – and if so why - the effects of globalization differ systematically in dependence of the indicator used to map the welfare state (e.g. expenditure data vs. event data). Moreover, globalization is mainly measured via trade openness, restrictions on capital mobility and bilateral trade relations. These indicators are to some extent catch-all indicators that complicate the disentanglement of different causal mechanisms. What would be more nuanced measures for globalization than the state-of-the-art measures? We propose a panel that consists of five papers presenting novel research on globalization and the welfare state.