The Convergence of Welfare State Indicators in Europe: Evidence from Panel Data

Abstract

This paper investigates whether there is a convergence in welfare state programmes among the ‘old’ EU Member States. To identify such trends, the study relies on net pension and net unemployment replacement rates, as well as on public social expenditure data. Empirically, a sample of 14 economies (EU-15 excluding Luxembourg) between 1980 and 2005 is used. The empirical findings reveal the presence of a convergence process, driven by a strong catch-up in social protection levels in the southern Member States. Furthermore, convergence in replacement rates is substantially less pronounced than convergence in public social expenditure. In sum, the results indicate that the converging trend of public social expenditure and unemployment benefits has continued in advanced industrialised countries and over time. These findings confirm and expand on earlier studies (Caminada et al. 2001; Starke et al. 2008; Schmitt and Starke 2011).