A Formal Theory of the Semi-Private American Welfare State

Kaj Thomsson, Economics Department, Maastricht University

I construct a model of public policy development, and use the model to explain why the United States has a comparatively small public sector, but instead a large ‘private welfare state’ with employment-based benefits. The key actors are politically organized firms and labor unions. These interest groups can use campaign support to influence a political decision-maker who decides whether to implement a social benefit. In addition, the firms can influence the outcome indirectly by privately providing their own workers with the benefit. This setup leads to three possible outcomes. In the first, no one is provided the social benefit. In the second, all workers receive it through government provision. In the third, some workers receive the policy, through their employers. I argue that the features leading to the third equilibrium correspond closely to political institutions and industry characteristics of the US, while the features of the second equilibrium better describe European countries.

About the speaker
Kaj Thomsson is Assistant Professor in the AE1 section of the Economics Department at Maastricht University. He finished his PhD in 2009 at Yale University with a dissertation entitled "Interest Groups, Political Institutions and the Development of the American Welfare State". His primary areas of research interest are political economy, historical economics and institutional economics. He is also interested in industrial and labor market regulation and competition policy. The (geographic) focus of his dissertation was the United States, and while he maintains a focus on North American institutions, he is currently broadening the range of research to include policy development in Latin America and Europe.

Venue: Kapoenstraat 2, Maastricht, room 0.009

Date: 14 October 2010

Time: 12:30  CEST