Explaining convergence of OECD welfare states: a conditional approach

Abstract

Existing studies have found only limited empirical evidence of welfare state convergence. Moreover, although there are good theoretical reasons both for and against welfare state convergence, there are virtually no studies that have explicitly tested the assumed effects. We argue that the concept of conditional convergence helps to both better describe and explain the phenomenon. By applying error correction models, we examine conditional convergence of various types of social expenditure in 21 OECD countries between 1980 and 2005. Our empirical findings go beyond the existing literature in two respects. First, we show that there is very strong evidence of convergence across all categories of social expenditure when conditional factors are taken into account. Second, we demonstrate that the speed of convergence is highly driven by globalization and European Union membership and shaped by existing welfare state structures.