Economic Globalization and the Welfare State in Affluent Democracies, 1975-1998

Prior scholarship is sharply divided on how or if globalization influences welfare states. Globalization's effects may be positive causing expansion, negative triggering crisis and reduction, curvilinear contributing to convergence, or insignificant. We bring new evidence to bear on this crucial debate with a pooled time series analysis of two measures of the welfare state and 16 indicators of economic globalization for 17 affluent democracies from 1975 to 1998. The analysis suggests that: (1) state-of-the-art welfare state models warrant revision in the globalization era; (2) most indicators of economic globalization do not have significant effects; (3) the few significant globalization effects are in different directions and often inconsistent with extant theories; (4) the globalization effects are far smaller than the effects of domestic political and economic factors; and (5) these effects are not systematically different for liberal vs. nonliberal welfare state regimes, European vs. non-European countries, or with four alternative dependent variables. Increased globalization and a modest convergence of the welfare state have occurred, but globalization does not unambiguously cause welfare state expansion, crisis and reduction or convergence.