Economic crisis, European WelfareState Models and Inequality
Carlos Ochando ClaramuntDepartment of Applied Economics,
University of Valencia (Spain)
Paper presented to XIII International Colloquium ISEG-Ulisboa 11-13 Mayo 2016.
“Post-2008 Global Dynamics and Structural Changes: economic, political and Eco-societal transitions”
Aims of the study
1. To analyse the relationship between the EuropeanWelfare State Models and inequality.
2. To analyse the relationship between Welfare Statesystems and the redistribution index: the Spanish case
An analysis of inequality in six European welfare state systems or models :
1- Nordic model (Denmark, Finland, Sweden and the Netherlands);
2- Continental model (Austria, Belgium, France, Germany and Luxembourg);
3- Mediterranean model (Greece, Italy, Portugal and Spain) ;
4- Anglosaxon model (United Kingdom and Ireland);
5- Central and Eastern European model (Bulgaria, Czech Republic, Hungary,Poland, Romania, Slovakia, Croatia and Slovenia) and
6- Baltic model (Estonia, Lithuania and Latvia).
1.European welfare state systems and inequality.
Nordic model
Denmark Finland Sweden Netherlands
2007 25,2 26,2 23,4 27,6
2012 28,1 25,9 24,9 25,4
0
5
10
15
20
25
30
Índice de Gini
Denmark Finland Sweden Netherlands
Evolución
2007-201211,5% -1,1% 6,4% -8,0%
-10,0%
-5,0%
0,0%
5,0%
10,0%
15,0%
Índice de Gini: Evolución 2007-2012
Gini Index Gini Index: Trend 2007-2012
Continental model
Austria Belgium France Germany Luxembourg
2007 26,2 26,3 26,6 30,4 27,4
2012 27,6 26,5 30,5 28,3 28
0
5
10
15
20
25
30
35
Índice de Gini
Austria Belgium France Germany Luxembourg
Evolución
2007-20125,3% 0,8% 14,7% -6,9% 2,2%
-10,0%
-5,0%
0,0%
5,0%
10,0%
15,0%
20,0%
Índice de Gini: Evolución 2007-2012
Gini Index Gini Index: Trend 2007-2012
Anglosaxon model
United Kingdom Ireland
2007 32,6 31,3
2012 32,8 29,8
0
5
10
15
20
25
30
35
Índice de Gini
United Kingdom Ireland
Evolución
2007-20120,6% -4,8%
-6,0%
-5,0%
-4,0%
-3,0%
-2,0%
-1,0%
0,0%
1,0%
Índice de Gini: Evolución 2007-2012
Gini Index Gini Index: Trend 2007-2012
Mediterranean model
Greece Spain Italy Portugal
2007 34,3 31,9 32,2 36,8
2012 34,3 35,0 31,9 34,5
0
5
10
15
20
25
30
35
40
Índice de Gini
Greece Spain Italy Portugal
Evolución
2007-20120,0% 9,7% -0,9% -6,2%
-8,0%
-6,0%
-4,0%
-2,0%
0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
12,0%
Índice de Gini: Evolución 2007-2012
Gini IndexGini Index: Trend 2007-2012
Central and Eastern European model
Bulgaria Czech Republic Hungary Poland Romania Slovakia Croatia Slovenia
2007 35,3 25,3 25,6 32,2 37,8 24,5 29 23,2
2012 33,6 24,9 26,9 30,9 33,2 25,3 31 23,7
0
5
10
15
20
25
30
35
40
Índice de Gini
Bulgaria Czech Republic Hungary Poland Romania Slovakia Croatia Slovenia
Evolución
2007-2012-4,8% -1,6% 5,1% -4,0% -12,2% 3,3% 5,2% 2,2%
-14,0%
-12,0%
-10,0%
-8,0%
-6,0%
-4,0%
-2,0%
0,0%
2,0%
4,0%
6,0%
8,0%
Índice de Gini: Evolución 2007-2012
Gini Index Gini Index: Trend 2007-2012
Baltic model
Estonia Latvia Lithuania
2007 33,4 35,4 33,8
2012 32,5 35,7 32
0
5
10
15
20
25
30
35
40
Índice de Gini
Estonia Latvia Lithuania
Evolución
2007-2012-2,7% 0,8% -5,3%
-6,0%
-5,0%
-4,0%
-3,0%
-2,0%
-1,0%
0,0%
1,0%
2,0%
Índice de Gini: Evolución 2007-2012
Gini Index Gini Index: Trend 2007-2012
The welfare state model correctly explains the initial levels ofinequality in the countries (prior to the crisis) and continues toexplain the absolute levels of inequality that exist between thedifferent countries (the levels of inequality existing in countrieswith a Nordic or Scandinavian welfare state system are lower than,for example, those countries with Anglosaxon or Mediterraneanmodels).
However, as a consequence of the current economic crisis, it canbe seen that simply belonging to one particular welfare state systemor another does not explain the different ways in which inequalityhas evolved in each one of the European countries. That is to saythat, even in countries with the same welfare state model,inequality has not evolved in the same way; this seems to indicatethat it is not only the welfare state system of each country whichexplains the changes in inequality, but that other factors (economic,political and/or social) also play their part.
Main results
2- Welfare state systems and redistribution
Índice de Redistribución. 2012.
0,41
07
0,40
35
0,52
67
0,47
38
0,44
90
0,44
18
0,47
98
0,44
23
0,41
42
0,41
40
0,38
76
0,39
72
0,38
28
0,33
71
0,32
84
0,44
11
0,42
76
0,46
84
0,45
01
0,44
04
0,39
90
0,38
88
0,36
15
0,34
95
0,29
26
0,37
38
0,32
15
0,31
48
0,2000
0,2500
0,3000
0,3500
0,4000
0,4500
0,5000
0,5500
EU15EU28
Sweden
Denmark
Netherla
nds
Finland
Germany
Belgium
Luxe
mbourg
Austria
France
Greece
Portugal
Spain
Italy
Ireland
United K
ingdom
Hungary
Slove
nia
Czech
Republic
Slova
kia
Croatia
Romania
Poland
Bulgaria
Lithuania
Estonia
Latv
ia
Redistribution Index, 2012
The welfare model or system accurately explains the different degreeor index of redistribution reached by each country. So, we can seethat, in terms of their social policies, the highest levels ofredistribution are to be found in the Nordic, Anglosaxon andContinental models; on the other hand, the Mediterranean countries,the Baltic countries and some Central and Eastern Europeancountries redistribute less.
2- Welfare state systems and redistribution
Redistribution index: the Spanish case
24
26
28
30
32
34
36
38
40
42
44
46
48
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Índice Gini Neto y Bruto. Fuente: SWIID
Gini Neto Gini Bruto
0,08
0,12
0,16
0,2
0,24
0,28
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Índice Redistribución. Fuente: SWIID
Redistribution IndexNet and Gross Gini Index
Source: SWIID
The welfare state model continues to explain the levels of inequality between differentcountries. Namely countries with a Nordic or Scandinavian welfare State have lowerlevels of inequality than, for example, the Anglo-Saxon countries or Mediterraneanmodel.
However, since the current economic crisis started, we find that just belonging to aparticular Welfare State Model does not explain the different evolution of inequality ineach of the European countries.
Inequality has not moved in the same direction in all countries of the same model. Thisseems to prove that, besides belonging to a certain welfare state model, other factors(economic, political and/or social) occurring in a country explain changes in inequality.
The current austerity and fiscal consolidation policies are increasing inequality in mostEuropean countries. Fiscal consolidation policy is not only decreasing domestic demandbut it is contributing to generate a more regressive distribution of income and wealth.
CONCLUSIONS