Where is it worth it not to work?

By | 11.8.2016

Measuring and comparing the generosity of social programs (pensions, unemployment benefits, sickness benefits) across countries is not an easy task. There are several aspects which affect the actual level of generosity: eligibility, duration, waiting period, a level of the payment itself etc. Moreover, to be precise, when comparing different countries, one would need to account for economic conditions as well. The CWED project took a first step towards this goal and created a one-dimensional index which allows us to compare the generosity of social programs among different economies.

Kuitto, Jahn and Düpont took an advantage of the CWED dataset and analyzed welfare policy institutions in Europe between 1995 and 2007. In particular, they studied whether welfare policies across Europe converge. To do so, the authors divided European countries into 5 groups according to their historical-cultural background: Anglo-Saxon, Bismarckian, Scandinavian, Southern European, and CEE and plotted their averaged indices over time.

In case of unemployment benefits, the duration when the unemployed are eligible for benefits differ significantly. Apart from Belgium which, as they claimed, has unlimited duration, the longest durations are observed in the Scandinavian countries, providing unemployment benefits for more than 3 times longer than the CEE or Anglo-Saxon countries. When it comes to replacement ratio, which measures how much of the average income is paid as unemployment benefits, a similar conclusion may be drawn; the Anglo-Saxon as well as the CEE countries are below the average of 60%, whereas Scandinavian, Southern, and Bismarckian are above.

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Reference: Kuitto, K., Jahn, D., & Düpont, N. (2012). Welfare Policy Institutions in the enlarged European Union: Convergence, Divergence or Persistence (No. 1). Greifswald Comparative Politics Working Paper. Available here.

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