Policy or institution? The political choice of retrenchment strategy

The present study breaks new ground in the study of welfare reform by developing the theoretical argument that governments can choose between transparent policy retrenchment and less-transparent institutional retrenchment when pursuing welfare state contraction.

Policy retrenchment is transparent because it reallocates substantial benefits and has direct and immediate consequences for welfare recipients. Institutional retrenchment is less transparent as it reallocates institutional authority and primarily has indirect long-term consequences. Owing to the difference in transparency and direct effects on the voter population, we theoretically propose that elected officials may choose strategically between policy and institutional retrenchment.

Consistent with the theoretical argument, we demonstrate that policy retrenchment is more frequently used in times of economic hardship and on welfare issues protecting against risks that are imposed disproportionately on the lower social strata. Contrary to our expectation, however, left-leaning governments do not apply strategies of policy retrenchment more often than right-wing governments.