DETERMINANTS OF SOCIAL SPENDING IN EUROPEAN UNION MEMBER-STATES: "GOVERNANCE MATTERS" VS "POLITICS MATTERS"

The contribution of this article is to test alternative approaches to explaining variation in the generosity of welfare spending across states. We use panel data from 27 European Union member-states over the period 1990-2011. We rely on the experience of previous research papers and use social expenditure (% of GDP) as a measure of welfare generosity. We also use data on left-wing parties as a percentage of parliamentary seats for all governmental parties and the Quality of Government indicator, provided by the International Country Risk Guide. Regression analysis, including mixed-effects modelling, demonstrates that there is a positive relationship between institutional and welfare performance. However, an analysis of subsamples within the dataset shows that the effect of the quality of government on welfare generosity varies across states: the strong positive effect holds only for post-communist states. Our study verifies that power resource theory is losing its explanatory potential, while the role of institutional performance in explaining the generosity of the welfare state is increasing.