Social Security Strategies and Redistributive Effects in European Social Transfer Systems

The present paper examines the linkage between social security strategies and redistributive effects in European social transfer systems. It is argued that the various European systems produce different patterns of redistribution that may be explained by the adoption of different mixes of social security strategies. These, in turn, reflect the enduring influence of the three major European social security traditions (the poor law tradition, the social insurance tradition, and the welfare state tradition). In support of this argument, several ideal-typical strategies of social security are identified, traced back to their traditional roots and discussed from the viewpoint of economic, sociological and political arguments. Subsequently, a classification of European social transfer systems is introduced, reflecting the mixture of the social security strategies employed. For this purpose, a set of indicators depicting different aspects of social security strategies is invoked. Using these indicators as input variables, various cluster analyses are carried out. The results indicate that European social transfer systems may be classified into four broad regimes to which most of the systems may be assigned fairly clearly. Finally, the linkage between the class assignment of the European social transfer systems and the redistributive patterns they produce is investigated. To assess the overall redistributive effects, three measures for distributive efficiency based on the Gini Coefficient, the quintile relation and the percentage of households below the low income threshold of 60% of median equivalized income are calculated. We find that the results vary greatly not only between systems but also between different measures calculated for a given system, indicating that different systems may affect the various income groups differently. Consequently, the redistributive impacts across income quintiles are investigated. We find that the redistributive effects for the various countries show characteristic profiles that reflect the class assignments identified in our cluster analyses. The patterns are strikingly similar for countries belonging to the same cluster but differ markedly between groups. We conclude that the redistributive effects clearly reflect the cluster assignment of the social transfer systems, indicating that the redistributive pattern is heavily influenced by the mixture of social security strategies employed.

Kraus, Margit (2000), Social Security Strategies and Redistributive Effects in European Social Transfer Systems, ZEW Discussion Paper No. 00-40, Mannheim.