Notes on Political Economy in
International Perspective
Week I:
Bismarck provided the first typology of a welfare state. It was nested on the equivalence
principle. There is a direct relationship between benefits, contributions, loss of earnings, and
risk. There is also a contribution limit and mandatory insurances. The coverage of these
insurances is limited to employees, with a focus on occupational hazard. Employers and
employees run the system together.
Beveridge provided another typology, which is based on the principle of solidarity. It has flat-
rate benefits, and means-tested programmes. The government oversees running this system.
Welfare state regime: “the institutional arrangements, rules, and understandings that guide
and shape concurrent social policy decisions, expenditure developments, problem definitions,
and even the respond-and-demand structure of citizens and welfare consumers” (Esping-
Andersen, 1990). It has two dimensions, relating to the degree of decommodification
(meaning the extent to which an individual can maintain their own livelihood without relying
on the market) and the kind of social stratification (the degree to which government reduces,
maintains, or alternatively, reinforces social divisions among citizens).
Esping-Andersen developed a typology based on these two dimensions, distinguishing
between three types of welfare states, being liberal, conservative, and social-democratic
welfare states. This typology was extended by other authors arguing for other factors to be
considered. Later, research also continued empirically.
“Workhorse model”: typology of welfare states by Sapir. He distinguishes between the
following welfare state regimes:
o Nordic countries: has the highest level of social expenditures (high benefit levels),
universal social protection, many active labour market policies (‘carrot’, like training),
and tax-based funding (with some contributions). The government runs the system.
There are compressed wages as result of strong labour unions.
o Anglo-Saxon countries: has many social assistance type schemes, mainly focused on
the labour force. Additionally, there are low benefit levels as an incentive, which are
not related to previous earning (and the composition of households is taken into
1
, account). There are also active labour market policies (but more ‘stick’, so obligations
to work). Benefits are partly in-kind (such as food stamps), which are funded mainly
through tax, instead of social contributions. There are relatively many additional
private insurance schemes and wages are dispersed.
o Continental countries: has social security schemes which are focused on employees,
with civil society running the social security system, although the government has
made the social insurances mandatory. The level of benefits is related to contributions
paid and/or duration of the employment history. Redistribution takes place mainly
within social classes or sectors.
o South-European countries: has low social expenditures because of the strong role of
family and church. Public social expenditures are mainly on public pensions.
Employment protection legislation is important, as well as early retirement. There is a
high degree of segmentation regarding social rights. There are also compressed wages.
Public social expenditure (as percentage of GDP) is not an efficient indicator because of
economic growth, and because the indicator is influenced by demographic changes (such
as ageing populations), and labour market conditions (such as unemployment). The
advantage of using percentage of GDP is to correct for exchange rates and inflation, so that
outcomes are comparable.
Comparative political economy is about explaining the variation across countries and over
time in reform. For this, there is a focus on economic, political, and institutional variables.
Comparing is done to learn about the effects of independent variables on a dependent
variable, amongst different cases. Qualitative and quantitative research methods are used on a
complementary basis. The key method herein is pooled time series cross-section regression
analysis.
Before the 1980s, political economy was analysing the expansion of the welfare state.
Onwards, political economy has been engaged with reforms or retrenchments.
2
International Perspective
Week I:
Bismarck provided the first typology of a welfare state. It was nested on the equivalence
principle. There is a direct relationship between benefits, contributions, loss of earnings, and
risk. There is also a contribution limit and mandatory insurances. The coverage of these
insurances is limited to employees, with a focus on occupational hazard. Employers and
employees run the system together.
Beveridge provided another typology, which is based on the principle of solidarity. It has flat-
rate benefits, and means-tested programmes. The government oversees running this system.
Welfare state regime: “the institutional arrangements, rules, and understandings that guide
and shape concurrent social policy decisions, expenditure developments, problem definitions,
and even the respond-and-demand structure of citizens and welfare consumers” (Esping-
Andersen, 1990). It has two dimensions, relating to the degree of decommodification
(meaning the extent to which an individual can maintain their own livelihood without relying
on the market) and the kind of social stratification (the degree to which government reduces,
maintains, or alternatively, reinforces social divisions among citizens).
Esping-Andersen developed a typology based on these two dimensions, distinguishing
between three types of welfare states, being liberal, conservative, and social-democratic
welfare states. This typology was extended by other authors arguing for other factors to be
considered. Later, research also continued empirically.
“Workhorse model”: typology of welfare states by Sapir. He distinguishes between the
following welfare state regimes:
o Nordic countries: has the highest level of social expenditures (high benefit levels),
universal social protection, many active labour market policies (‘carrot’, like training),
and tax-based funding (with some contributions). The government runs the system.
There are compressed wages as result of strong labour unions.
o Anglo-Saxon countries: has many social assistance type schemes, mainly focused on
the labour force. Additionally, there are low benefit levels as an incentive, which are
not related to previous earning (and the composition of households is taken into
1
, account). There are also active labour market policies (but more ‘stick’, so obligations
to work). Benefits are partly in-kind (such as food stamps), which are funded mainly
through tax, instead of social contributions. There are relatively many additional
private insurance schemes and wages are dispersed.
o Continental countries: has social security schemes which are focused on employees,
with civil society running the social security system, although the government has
made the social insurances mandatory. The level of benefits is related to contributions
paid and/or duration of the employment history. Redistribution takes place mainly
within social classes or sectors.
o South-European countries: has low social expenditures because of the strong role of
family and church. Public social expenditures are mainly on public pensions.
Employment protection legislation is important, as well as early retirement. There is a
high degree of segmentation regarding social rights. There are also compressed wages.
Public social expenditure (as percentage of GDP) is not an efficient indicator because of
economic growth, and because the indicator is influenced by demographic changes (such
as ageing populations), and labour market conditions (such as unemployment). The
advantage of using percentage of GDP is to correct for exchange rates and inflation, so that
outcomes are comparable.
Comparative political economy is about explaining the variation across countries and over
time in reform. For this, there is a focus on economic, political, and institutional variables.
Comparing is done to learn about the effects of independent variables on a dependent
variable, amongst different cases. Qualitative and quantitative research methods are used on a
complementary basis. The key method herein is pooled time series cross-section regression
analysis.
Before the 1980s, political economy was analysing the expansion of the welfare state.
Onwards, political economy has been engaged with reforms or retrenchments.
2
