Transition of Social Welfare in the European Country Clubs

This paper focuses on the dynamics of welfare by studying the persistence and transition of poverty risk, social transfers, employment and unemployment in the four European Country Clubs as defined by Esping-Andersen, G. (1990) and Bertola et al. (2001). We model their evolution in a multistate Markov process for proportions of aggregate data and estimate the transition matrix by adopting a Bayesian approach under inequality constraints and Monte Carlo Integration. Our approach uncovers the entire empirical posterior distribution of persistence and transition probabilities, for which statistical inference is readily available. The results show high persistence in unemployment rate in the Anglo-Saxon social club, whilst regarding social expenditures the four identified social clubs converge to two, the Nordic with the Continental club and the Anglo-Saxon with the Southern club. The half life statistics show fast pace across all variables of interest.