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Thursday, February 07, 2008

“Why Welfare States Persist”

Andrew Gelman reviews “Why Welfare States Persist,” by Clem Brooks and Jeff Manza:

Why Welfare States Persist, by Andrew Gelman: ...[for Political Science Quarterly] Why do welfare states persist? Because they are popular, argue Clem Brooks and Jeff Manza in their new book, a statistical study of the connections between public opinion and policies in 16 rich countries in Europe and elsewhere.

Rich capitalist democracies around the world differ widely in their welfare states ... despite having comparable income levels. Brooks and Manza report that welfare state spending constituted 27% of GDP in “social democratic countries” such as Sweden and 26% of GDP in “Christian democratic countries” such as Germany, but only 17% in “liberal democracies” such as the United States and Japan. These differences are correlated with differences in income inequality and poverty rates between countries.

In their book, Brooks and Manza study how countries with different levels of the welfare state differ in their average policy preferences... Brooks and Manza find that countries where government jobs policies and redistribution are more popular are the places where the welfare state is larger, and this pattern remains after controlling for time trends, per-capita GDP of the country, immigration, women’s labor force participation, political institutions, and whether the ruling party is religious or on the left. ...

Brooks and Manza make a convincing case that attitudes are indeed correlated with policies... Chapter 2 of the book attempts to go further and make a claim of causality, to say that variation in countries’ attitudes are not just associated with policy variation but are actually a contributing cause of these policies. As a substantive matter, the causal claim undoubtedly has truth: in a democracy with all other things equal, we would expect a change in attitude to generally push toward the corresponding policy. ... That said, I do not see that the statistical methods used ... establish causality... Using a statistical “test for endogeneity” cannot get around the fundamental issue that this is a cross-national comparison based on observational data: some countries have bigger welfare states than others, and these tend to have higher support for welfare states, even after (approximately) adjusting for some country-level factors. ...

Turning to surveys from individual countries--Sweden, Norway, Holland, and the United States--Brooks and Manza find that attitudes toward government-provided social services vary by country but have changed little from 1975 to 2000. Cross-national differences in attitudes, as well as in policies, seem stable... Meanwhile, the size of the welfare state in rich countries has been stable since 1980, although with variation in individual countries...

These findings of stability in opinions and, in general, in spending, appear to contradict the conventional wisdom that welfare state policies have become repudiated in recent decades because of various factors, including: the fall of Communism and the corresponding discrediting of socialism as an economic policy; various economic crises since 1973 which have brought into question the ability of governments to pay for generous welfare benefits; and the growing presence of immigrants from poor countries, which has reduced the social consensus for income redistribution. One possible reconciliation of Brooks and Manza’s story and the general “decline of the welfare state” narrative is that, since 1980 or so, we have seen a conflation of welfare state expansion and reduction which happens to have averaged to a pattern of stability. In the wake of an aging population and lower employment rates, health-care spending has increased while job security programs have declined. Perhaps Brooks, Manza, and others who know more about this topic can let us know if this attempted synthesis makes sense.

Brooks and Manza have made a useful contribution... The book makes a compelling case for how policy differences between countries can persist, even in our modern, globalized, and post-socialist economy.

    Posted by on Thursday, February 7, 2008 at 01:53 AM in Economics, Social Insurance | Permalink  TrackBack (0)  Comments (88)

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