Globalization and the welfare state: the same strategies for similar problems?

Abstract

This paper analyses the recent evolution of public expenditure, social protection expenditure, income inequality and the risk of poverty in the European Union. It argues that some of the pressures derived from globalization have been translated into a relative reduction on the efforts devoted to public expenditure and social protection expenditure compared to growth in the GDP, resulting in a negative impact both on income distribution in the low-income population, and on the risk of poverty. Our hypothesis is that this relative reduction in spending in welfare states has come about through a general dynamic of convergence, albeit with ‘deviant’ cases. The countries that used to allocate the most resources to public expenditure and social protection expenditure are those that have cut back the most, and where income inequality and the risk of poverty have increased the most. Conversely, the countries that used to allocate the fewest resources are those that have increased expenditure and where income inequality and the risk of poverty have fallen the most.