economic crisis, european welfare state models and inequality€¦ · economic crisis, european...

Economic crisis, European WelfareState Models and Inequality

Carlos Ochando ClaramuntDepartment of Applied Economics,

University of Valencia (Spain)

[email protected]

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”

mailto:[email protected]

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%



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%



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%


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%



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%



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

economic crisis, european welfare state models and inequality€¦ · economic crisis, european...

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