Can we all be Denmark? Re-evaluating the role of culture as a determinant of welfare state reform

Andrea Celico (Universidad de Navarra)
Martin Rode (Universidad de Navarra)

Abstract

Past research has demonstrated the economic effectiveness of labor market reforms that broadly follow the Danish flexicurity model, defined as the combination of highly flexible labor market policies and generous protection schemes for individuals that become unemployed. Notwithstanding, it has also been argued that the fiscal and political viability of this model rests on very specific cultural characteristics, such as the prevalence of high overall levels of social trust. Furthermore, large and generous welfare states might erode civic attitudes over time, defined here as people's willingness to cheat on taxes, transfers, or practice free-riding. Combining data from all available waves of the World Values Survey (WVS) with a self-constructed flexicurity index, this paper finds no support for the claim that civic attitudes in OECD and EU countries are substantially eroded by reforms consistent with higher labor market flexicurity. Furthermore, results are neither conditional on average social trust levels, nor on historical elements of welfare state design.

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