Dealing with Technological Change: Social Policy Preferences and Institutional Context

Abstract

How does technological change affect social policy preferences across different institutional contexts? In this paper, we argue that individuals who perceive high levels of technology-related employment risks prefer passive policies like unemployment benefits over active measures like retraining in order to satisfy the need for immediate compensation in the case of job loss. At the same time, general support for passive (active) policy solutions to technological change should be significantly lower (higher) in countries where generous compensation schemes already exist. As the perception of technology-related employment risks increases, however, we expect that social policy preferences among high-risk individuals should converge across different welfare state contexts. We use novel data from a diverse set of 24 OECD countries that specifically measure preferred social policy solutions to technological change in a constrained choice scenario. Applying statistical methods that explicitly model the trade-off faced by individuals, we find evidence in line with our theoretical expectations.