Inclusion versus Exclusion: Political Institutions and Welfare Expenditures

Abstract

Despite the large number of empirical studies on the determinants of welfare expenditures, a systematic exploration of the consequences of political institutions on welfare effort (welfare spending as a percentage of national income) is still lacking.' Political institutions in our context are the constitutional features of a political system. This study discusses two sorts of veto points, collective and competitive, that affect welfare effort. The former should buoy welfare expenditures, while the latter should depress them. These hypothesized effects can be tested empirically with a pooled time series, cross-sectional model that estimates the effects of different veto points on welfare expenditures and degrees of decommodification. Decommodification, defined as services rendered as a matter of right, and when a person can maintain a livelihood without reliance on the market, is included as a second dependent variable because the commitment of various countries to welfare state policies can not be assessed by welfare expenditures alone.2 Equally crucial in an accurate assessment of the degree to which citizens are protected from the vagaries of the market are eligibility rules, restrictions on entitlements, the degree of income replacement, and the range of entitlements. Thus, the measure of decommodification represents a more complete indicator of the seriousness with which countries take the issue of welfare.