Globalization and the Decline of the Welfare State in Less-Developed Countries

• Published in: International organization Vol. 56; no. 2; pp. 411 - 445
• Main Author: Rudra, Nita
• Format: Journal Article
• Language: English
• Published: New York, USA Cambridge University Press 01-04-2002; MIT Press; The MIT Press
• Subjects: Capital; Capital mobility; Capital movements; Collective action; Developed countries; Developing Countries; Economic models; Economic relations; Expenditures; Globalization; Government; Government Spending; Gross domestic product; International market; International markets; Labor; Labor Market; Labor Relations; Labor sector; Labor surplus; Labour; LDCs; Markets; Power; Public assistance programs; Public expenditure; Skilled workers; Social and economic security; Social policy; Social Welfare; Welfare Services; Welfare State
• ISSN: 0020-8183; 1531-5088; 1531-5008
• DOI: 10.1162/002081802320005522

Why have trends in government welfare spending in developing countries diverged from those in developed countries? I address this question by investigating the effects of capital and trade flows on government welfare spending in fifty-three developing countries. Using an original measure of labor power in developing countries, I test the links between international markets, labor's political strength, and the welfare state. I argue that labor's collective-action problems, caused by large populations of low-skilled and surplus workers, offset labor's potential political gains from globalization. I show that when the proportion of low-skilled workers in a nation is high, globalization will lead to a decline in welfare spending. Most significantly, the results suggest that in nations where labor-market institutions are not yet well developed, government social-welfare spending is constrained by international market, forces.