Distribution regimes and redistribution effects during retrenchment and crisis: A cui bono analysis of unemployment replacement rates of various income categories in 31 welfare states

Abstract:

This article analyses redistribution effects during retrenchment and crisis in 31 welfare states using a new data set from a refined analysis of unemployment replacement rates of low-, middle- and high-income levels – Comparative Welfare Entitlements Dataset 2 (CWED2). Starting by identifying four distribution regimes before the economic crisis, the analysis shows that these regimes determine the redistribution of unemployment benefits during the period of retrenchment.

As expected, equality-oriented capitalism redistributes in favour of the low-income levels and status-oriented and competitiveness-oriented capitalism have no redistribution effects. More interesting is the redistribution effect of a fourth regime type which favours high-income groups and which is present in both Western (Mediterranean) and Central and Eastern European countries.

Another intriguing finding is that – with some notable exceptions – the period of retrenchment has been characterized by sparing the low-income groups from severe cuts. This has changed in the current economic crisis where this group has experienced severe cuts in their benefits. The reaction to the crisis is also more strongly determined by immediate needs and is not as well explained by the distribution regimes.