Is there a trade-off between economic efficiency and a generous welfare state? A comparison of best cases of 'the three worlds of welfare capitalism'

Abstract

A crucial debate in policy-making as well as academic circles is whether there is a trade-off between economic efficiency and the size/generosity of the welfare state. One way to contribute to this debate is to compare the performance of ‘best cases’ of different types of state. Arguably, in the decade 1985-94, the US, West Germany and the Netherlands were ‘best cases’ - best economic performers - in what Esping-Andersen (1990) calls ‘the three worlds of welfare capitalism’. The US is a liberal welfare-capitalist state, West Germany a corporatist state, and the Netherlands is social democratic in its tax-transfer system, although not its labor market policies. These three countries had rates..