Distributional Effects of Labor Market Reforms in Continental and Southern Europe

In the current age of austerity, welfare state expansion is severely constrained by limited financial resources and increasing social demands. Consequently, labor market reforms should no longer be analyzed merely in terms of the size and generosity of social policies but rather with regards to their distributional effects for specific social groups. In this paper, I test the effect of partisanship on the distributive effects of labor market reforms for labor market insiders and outsiders. A new measurement, based on coding the content of labor market reforms, allows me to map distributional effects in a two-dimensional policy-space and subsequently to use this as a dependent variable in an analysis of partisanship effects. Two findings are of relevance: first, policy instruments cannot be classified generically as pro-insider or pro-outsider. Second, my results contradict prominent claims in the literature, according to which social democracy has generally become an advocate of insider interests.