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Download Policy Brief No. 3

Hans Pitlik, Friedrich Heinemann and Rainer Schweickert, Overcoming Reform Resistance and Political Implementation of Large-scale Welfare State Reforms, WWWforEurope Policy Brief No. 3, April 2014


Research papers to download

Yu-Fu Chen, Holger Görg, Dennis Görlich, Hassan Molana, Catia Montagna and Yama Temouri, Globalisation and the Future of the Welfare State, WWWforEurope Working Paper No. 54, February 2014

Mariya Mileva, Sebastian Braun and Wolfgang Lechthaler,  The Effects of Globalization on Wage Inequality: New Insights from a Dynamic Trade Model with Heterogeneous Firms, WWWforEurope Working Paper No. 49, December 2013

Ágota Scharle and Balázs Váradi,  Identifying Barriers to Institutional Change in Disability Services, WWWforEurope Working Paper 41, September 2013

Hans Pitlik and Ludek Kouba, The Interrelation of Informal Institutions and Governance Quality in Shaping Welfare State Attitudes, Working Paper No. 38, August 2013

Towards a sustainable and fair welfare state in Europe

Quite in accordance with the newest policy brief on "Overcoming Reform Resistance and Rolitical Implementation of Large-scale Welfare State Reforms" by Hans Pitlik, Friedrich Heinemann and Rainer Schweickert, a number of new WWWforEurope papers on social policy deal with the question of the future of the European welfare state.

The aim of the project in this field is to find a set of policy recommendations aimed at the modernisation of existing welfare states, leading to an improved adaptability of welfare state structures to a rapidly changing external environment and the needs of socio-ecological transition, as well as policy-relevant information on how to manage institutional transitions.

But is the welfare state not outdated? Doesn't globalisation mean that welfare states hinder competitiveness? Yu-Fu Chen, Holger Görg, Dennis Görlich, Hassan Molana, Catia Montagna, and Yama Temouri show these prejudices to be wrong. Globalisation did not lead to a race to the bottom, quite to the contrary: welfare states are still strong and sometimes even growing. And welfare states themselves are an important competitiveness factor: Especially in countries with large firms and strong vertical linkages in the economy, welfare states enhance competitiveness. On firm level it can be shown that social expenditure can be attractive to foreign direct investment from abroad and keeps firms in the home country.

And what about the losers of trade liberalisation? Is increasing income inequality not due to globalisation and competition from abroad? Mariya Mileva, Sebastian Braun, Wolfgang Lechthaler analyse the effect of training on this problem. When there are effective vocational training measures then short-term negative impacts can be reduced: When taking training into account, trade liberalisation will lead to an increase in the number of high-skilled workers, because low-skilled workers will train to become high-skilled. At the same time re-training may help high-skilled workers in the import-competing sectors to find new high-skilled jobs in the export sector. In that scenario wage inequality increases much less.

Àgota Scharle and Balázs Váradi looked at specific disability programs and researched the most important drivers for change and reform. To be able to focus on similar cases the authors chose Sweden, Finland and Norway and show that the reasons why reforms worked best in Sweden are the following: fiscal constraints (Sweden had to change much more drastically than Norway), centralisation (Norway has a much looser system of administration than Sweden and therefore less incentive for change) and policy making capacity as well as commitment to equal rights (in Sweden there were more political players backing change than in Finland, Sweden bases its change systematically on research evidence).

And finally, Hans Pitlik and Ludek Kouba investigate the interrelation of informal institutions and governance quality in an extensive paper. There are some features which have a high impact on the belief whether the state should intervene in social and income outcomes: Furthermost it is the belief in oneself, the belief that one has control over one’s own life. People who believe they are controlling their own life course are not very supportive of a redistributing, intervening welfare state. And, surprisingly, there is an economically strong effect of trust or distrust in large companies: If the opinion on major private companies is low, people have a higher tendency to rely on the welfare state. In all of these variables, trust in government and the administration increases the preference for income equalisation and distribution – so, if governments want to have support for their interventions, they have to build up trust in themselves first.

Hans Pitlik and Ludek Kouba had the opportunity to present their research results at the American Public Choice Society Conference 2014, in Charleston, USA, on March 7th and 8th, 2014. At this conference Ludek Kouba chaired the session on informal institutions and presented on “I wanna live my life: Locus of Control and Support for the Welfare State”. Hans Pitlik’s presentation was titled “Do you still trust the government? The role of beliefs, performance and crises in shaping confidence in state institutions”. On April 3rd, 2014, Hans Pitlik presented the paper at the European Public Choice Society Conference in Cambridge, UK.