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The political economy of social assistance and minimum income benefits: a comparative analysis across 26 OECD countries

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Comparative European Politics Aims and scope

Abstract

Social assistance benefit schemes are a peculiar type of welfare state program. As the electoral costs are relatively low, this program forms an obvious target for cost reduction in times of austerity. The aim of this study is to examine the determinants of the developments in social assistance benefits. We seek to make two contributions. First, this paper provides insight into the role of economic, political, and institutional determinants of the variation in social assistance benefits. Second, cross-national data on social expenditures and income replacement rates are available for several welfare state programs, but not for social assistance benefits. Presenting minimum income benefit replacement rates, this study analyzes the developments of social assistance benefits across 26 OECD countries over the past two decades. The analysis leads to the conclusion that budgetary pressure stemming from increased exposure to international trade and soaring levels of unemployment is associated with benefit cuts.

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Notes

  1. A growing number of studies provides evidence for the micro-level mechanisms of the compensation hypothesis (Scheve and Slaughter 2004; Walter 2017).

  2. For a detailed analysis of micro-level mechanisms, see Rehm (2016).

  3. One-time social assistance allowances to cover unexpected and urgent needs or regular benefits to cover exceptional needs are not included in this benefit package. Furthermore, housing supplements are not included. The inclusion of housing supplements requires a number of demanding assumptions. Van Mechelen et al. (2011) have shown that the assumptions regarding the actual housing costs strongly determine the resulting benefit indicators. Therefore, we follow Scruggs’ (2005) approach and exclude the housing supplements from our minimum income benefit package.

  4. An important aspect of social assistance benefit programs is the coverage rate or take-up rate, which measures the extent to which individuals are entitled to the benefits. Recently, the OECD has published the Social Benefit Recipients Database but the data for social assistance benefit recipients are only available for the period 2007–2012 for lone parents (OECD 2016). These data show that between 2008 and 2012, long-term unemployment has surged and the number of recipients of social assistance increased. Longitudinal internationally comparable information on coverage rates of social assistance benefit recipients is scarce. Therefore, we do not include the coverage rate in our analysis.

  5. A sensitivity analysis reported below indicates that the regression results are not contingent on these large changes in the Central and Eastern European countries.

  6. This prediction is calculated by dividing the coefficient of the lagged-level variable (− 0.005) by the negative coefficient of the lagged dependent variable (−(− 0.056)) and then multiplying by 25. See Iversen and Cusack (2000, pp. 330–331) and Busemeyer (2009, p. 479).

  7. We have also examined indirect effects of the domestic institutions by including interaction variables between globalization and unemployment rates and institutional variables. We did not find robust results for such indirect effects.

  8. The difference in developments between trade and capital openness is even larger for the years 1990 and 2009 (instead of 2008), as FDI decreased substantially as a result of the financial crisis in 2009.

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Acknowledgements

An earlier version of this paper was presented at the 23rd International Conference of Europeanists (CES, 2016). We thank all participants and Koen Caminada, Kees Goudswaard, Carlo Knotz, Michal Polakowski, David Rueda, Duane Swank, Dorota Szelewa, Stefan Thewissen, Tim Vlandas and Chen Wang for useful comments and suggestions. The study has received support from the European Commission’s 7th Framework Program under Grant Agreement no. 312691, InGRID—Inclusive Growth Research Infrastructure Diffusion.

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  1. Olaf van Vliet and Jinxian Wang have contributed equally to this work.

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  1. Department of Economics, Leiden University, Steenschuur 25, 2311 ES, Leiden, The Netherlands

    Olaf van Vliet & Jinxian Wang

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van Vliet, O., Wang, J. The political economy of social assistance and minimum income benefits: a comparative analysis across 26 OECD countries. Comp Eur Polit 17, 49–71 (2019). https://doi.org/10.1057/s41295-017-0109-7

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