Globalization, welfare regimes and social protection: expenditures in Western and Eastern European countries

This paper analyzes the effects of globalization on social protection expenditures in European countries. The analysis adds to the literature due to its special focus on (a) the Eastern European countries and (b) on differences in globalization effects between welfare regimes. We find evidence in favor of the compensation hypothesis in Western Europe which is driven by the conservative welfare regime, outweighing the efficiency effect of globalization in the social-democratic welfare regime. In Eastern European countries the efficiency effect is predominant. No globalization effect is found for the liberal and the southern welfare regimes. Our results indicate some convergence within Western Europe and a divergence between the East and the West of Europe. We stress the importance of disaggregating by welfare regimes when exploring the effects of globalization on public social protection expenditures.

pre-refereed version as allowed by publisher.

Has originally been published as a Middlesex University Business school: department of economics and statistics, discussion paper no 140 in April 2010.