Globalization and the Welfare State: Four Hypotheses and Some Empirical Evidence

This paper examines some implications of the 'new globalism' for the welfare state. We examine four hypotheses about globalization and their implications for welfare state spending: the 'downward harmonization', 'upward convergence', 'convergence clubs' and 'globalization irrelevance' hypotheses. We provide evidence concerning these hypotheses by examining changes in the levels of welfare state spending for a subset of OECD countries. We find some evidence for a convergence of welfare state spending, not universally, but among countries with similar political institutions. Domestic political institutions, therefore, may affect the way in which countries respond to globalization pressures.