Quality of Government, Political Power and the Welfare State

Abstract

Why have different industrialized capitalist market economies developed such varying systems for social protection and social insurance? The hitherto most successful theory for explaining this is the Power Resource Theory (PRT), according to which the generosity of the welfare state is a function of working class mobilization. In this paper we argue however that there is an undertheorized link in the micro-foundations for PRT, namely why wage earners trying to handle the type of social risks and inequalities that are endemic for a market economy would turn to the state for the solution Our complementary approach, the Quality of Government (QoG) Theory, stresses the importance of trustworthy, reliable, impartial and reasonably uncorrupted government institutions as a precondition for citizens' willingness to support policies for social insurance and redistribution. Drawing on time-series crosssectional data on 18 OECD countries in 1984-2000, we find (a) that QoG positively affects the size and generosity of the welfare state, and (b) that the effect of working class mobilization on welfare state generosity is increasing in the level of QoG.