Abstract
This paper argues that the economic theory of the welfare state needs to be supplemented with a theory of the constitutional-institutional environment and the structure and governance of welfare provision. Although the chief aim is analytical, the paper draws on research on the institutional and economic features of unemployment compensation in Britain, Germany, and Denmark, and numerous examples of welfare arrangements in these countries are brought into the paper to illustrate the main points. A rational explanation for the diverse choices in the three countries of unemployment insurance and assistance provision is given.
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