18 Chapter 2 CWED developed by Scruggs et al. (2014)5. While social spending can sufficiently capture developments in the size of the budget once the appropriate controls for social need are included, the generosity index should be able to better capture other elements of welfare state effort such as changes in entitlement criteria and benefit duration (Scruggs, 2006). However, a limitation of this index is the exclusion of particular social protection programmes – such as certain types of unemployment schemes, maternity leave benefits, child/family benefits, and publicly provided health insurance/universal healthcare. Furthermore, the generosity index does not solve problems such as the ‘gradual manifestation’ of policy decisions in welfare state effort and concerns about the reliability of data6. Table 2.1 shows social spending as an average over the period 1990-2015 for each country7. France tops the table with on average 29 percent of its GDP spent on social welfare. Unsurprisingly, the Scandinavian countries also have high levels of social spending. Notably, however, Norway is somewhat lower with 22 percent of its GDP spent on social welfare on average – this could be because Norway spends considerably less on pensions, which usually make up a large proportion of social expenditures. Overall, it appears that Western European countries have higher levels of social spending than Eastern or Southern European countries, which links to the welfare state typologies developed by Esping-Andersen (1990). Overall, Social Democratic and Conservative welfare state typologies dominate the top half of the table and in contrast, the post-Soviet and Liberal welfare states spend a much lower percentage of GDP on welfare. When social spending is com5 The welfare generosity index from the CWED contains information on the generosity of social benefits through combing data on benefit replacement rates, qualifying conditions, waiting period, indexation, benefit duration, and elements of insurance coverage. Each of these aspects is normalised and combined into a program-specific generosity score for unemployment insurance, sick pay insurance, and public pensions. To form an overall generosity score, the scores for the three programmes are averaged to create a composite generosity index. This gives a standardised score on a continuous scale reflecting the overall generosity of benefit entitlements. Shortcomings of the indicator include that unemployment insurance only covers national insurance provisions that are earned without income testing and so excludes programmes such as the UK’s income-based Jobseeker’s Allowance or Germany’s unemployment assistance. Sick pay insurance covers the benefits that are paid in the instance of short-term non-occupational illness or injury. Public pensions covers only mandatory public programmes (Scruggs et al., 2014) The index closely resembles Esping-Andersen’s ‘decommodification index’ in The Three Worlds of Welfare Capitalism (Esping-Andersen, 1990; Scruggs & Allan, 2006). 6 Spending is measured as a percentage of GDP and the average production worker wage is used for the replacement rates in the construction of the generosity index. Thus, these indicators can change because GDP grows, or average wages increase rather than because of an actual change in the generosity of a benefit. 7 There is a different set of countries and a longer time period covered in Table 1 than in the main sample as the OECD provides more data than the CWED. In the sensitivity analysis for spending, the sample in the IV model is expanded to include the additional European countries and the most recent years.
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