Globalisation, Welfare Models and Social Expenditure in OECD Countries

Abstract

What difference do welfare models make for how globalisation in its different manifestations influences the composition of social expenditure? Using data for 36 Organisation for Economic Co-operation and Development (OECD) countries over the period 1990–2018 we examine whether and how different welfare state models influence the impact of the economic, social and political dimensions of globalisation on ten different social expenditure programs. The results indicate that the influence of globalisation (overall and each separate dimension) on different components of social spending varies across welfare models in intensity but in most cases presents a positive sign. We find a more intense positive reaction in the Nordic model for e.g. active labour market policies and housing expenditures, while the reactions of health and education spending are not context specific. Survivors pensions, incapacity related and unemployment benefits and other social policy areas respond to factors other than globalisation. These findings may have important consequences for cross-country convergence in standards of living between different welfare state regimes, as each dimension of globalisation proceeds at different paces. Previous literature also shows that changes in the composition of social expenditure result in different short and long run economic outcomes.