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A Comprehensive Empirical Model of Welfare State Retrenchment
Unformatted Document Text:  Globalization factor Globalization is usually used to suggest a variety of international challenges facing nation states and their welfare state arrangements in particular (Korpi 2003). Pierson also largely dismissed globalization as a source for fundamental welfare state changes. Swank (2005) concluded that the impact of globalization on the welfare state is transmitted mainly through “economic logic” of globalization. The economic logic suggests that globalization reduced the abilities of governments to achieve their social policies goals through the private business. Specifically, the private business will seek oversea low-cost market, resulting in high unemployment in domestic labor market. Korpi (2003) found that in analyzing the role of international political and economic changes for national policy making, distinguishing between different policy sectors in welfare states is fruitful, for example, the national policies to maintain full employment are likely to be much more sensitive to international developments due to the different prices of labor forces worldwide. The empirical result of the effects of globalization is inconclusive. Political economists have long argued that economic internationalization reduces the ability of governments to sustain or expand generous social welfare provisions. Garrett and Mitchell (2001) found a negative effect of trade openness and capital mobility on social expenditure, but the effects largely depend on how exactly “globalization” is measured. Castles (2004) found that there is no direct damaging impact of globalization on the welfare state retrenchment. Other scholars, on the contrary, found there is even a positive relationship between globalization and the welfare state (Burgoon 2001). Amable, Gatti, and Schumacher (2006) argued that globalization such as the transition of labor-focused industries to low-cost developing countries by FDI, changes the labor structure, leading to the decline of the political power of workers, especially unskilled workers. This is consequently associated to a political equilibrium yielding weaker income redistribution and/or employment protection. Demographic factor This is the factor that is most ignored by the scholars. Most of the authors only regarded it as a control variable. However economic indicators as well as some 8

Authors: Sun, Feng.
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background image
Globalization factor
Globalization is usually used to suggest a variety of international challenges
facing nation states and their welfare state arrangements in particular (Korpi 2003).
Pierson also largely dismissed globalization as a source for fundamental welfare state
changes.
Swank (2005) concluded that the impact of globalization on the welfare state is
transmitted mainly through “economic logic” of globalization. The economic logic
suggests that globalization reduced the abilities of governments to achieve their social
policies goals through the private business. Specifically, the private business will seek
oversea low-cost market, resulting in high unemployment in domestic labor market.
Korpi (2003) found that in analyzing the role of international political and economic
changes for national policy making, distinguishing between different policy sectors in
welfare states is fruitful, for example, the national policies to maintain full employment
are likely to be much more sensitive to international developments due to the different
prices of labor forces worldwide.
The empirical result of the effects of globalization is inconclusive. Political
economists have long argued that economic internationalization reduces the ability of
governments to sustain or expand generous social welfare provisions. Garrett and
Mitchell (2001) found a negative effect of trade openness and capital mobility on social
expenditure, but the effects largely depend on how exactly “globalization” is measured.
Castles (2004) found that there is no direct damaging impact of globalization on the
welfare state retrenchment. Other scholars, on the contrary, found there is even a positive
relationship between globalization and the welfare state (Burgoon 2001).
Amable, Gatti, and Schumacher (2006) argued that globalization such as the
transition of labor-focused industries to low-cost developing countries by FDI, changes
the labor structure, leading to the decline of the political power of workers, especially
unskilled workers. This is consequently associated to a political equilibrium yielding
weaker income redistribution and/or employment protection.
Demographic factor
This is the factor that is most ignored by the scholars. Most of the authors only
regarded it as a control variable. However economic indicators as well as some
8


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