Globalization, Integration, and the European Welfare State

Abstract

This paper considers three challenges to the mature European welfare states posed by economic and social integration, demographic changes, and the alleged decline of state capacity in the form of fiscal extraction in an era of globalization. I argue that the experiences of the older member states in the European Union are difficult to reconcile with the common assertions that globalization necessarily leads to a “race to the bottom” where welfare spending is downsized to the lowest common denominator. I develop a set of hypotheses on plausible linkages between demographic challenges, globalization, political capacity, and welfare spending, and test the propositions in an empirical analysis of 14 European Union member states from 1983 to 1998. My empirical results suggest that economic integration does not pose a threat to European welfare states. Rather, demographic changes such as low fertility rates and the aging of the population and their political implications for political leaders’ incentives are more serious challenges for the continuation of the welfare state in Europe. I am grateful to Kristian Skrede Gleditsch, Jeremy Busacca, and Constantine Drakatos for helpful comments and to Jacek Kugler and Yi Feng for providing me with data. This paper is part of a larger project funded by the Research Committee of the Academy of Athens, Athens, Greece. Previous versions of this paper were presented at the annual meeting of the American Political Science Association in Boston, August 2002 and at the Pan-European International Relations Conference in Canterbury, September 2001. E-mail: gizelis@chapman.edu