Welfare state regimes (three worlds of welfare capitalism)

The welfare state is the set of public institutions that insure people against loss of income through unemployment, illness, old age or disability and provide services such as health care and education. Gøsta Esping-Andersen argued in The Three Worlds of Welfare Capitalism (1990) that welfare states differ not mainly in how much they spend, but in how they are built.

• Decommodification: how far people can maintain a livelihood without relying on the labour market.
• Stratification: whether benefits are universal, tied to occupation and status, or targeted on the poor.
• The public–private mix: the roles of the state, the market and the family in providing welfare.
• Financing: general taxation, payroll contributions or private insurance.

Esping-Andersen identified three regimes:

• Liberal (the United States, the United Kingdom, Australia, Canada): modest universal transfers, means-tested assistance, encouragement of private insurance.
• Conservative-corporatist (Germany, France, Austria, Italy): social insurance tied to occupation and earnings, preserving status differences, often family-centred.
• Social democratic (the Nordic countries): universal benefits and services at high standards, financed by taxes.

He linked the regimes to the political coalitions that built them, especially the strength of labour movements and their alliances with farmers and the middle class. Korpi and Palme (1998) described a "paradox of redistribution": countries that target benefits on the poor tend to reduce poverty and inequality less than countries with encompassing, earnings-related programmes, because universal programmes command broader political support and larger budgets. Peter Lindert's historical work found little evidence that high social spending has reduced growth, which he called the "free lunch puzzle".

• Bismarck's social insurance laws in Germany (1880s) are the prototype of the conservative model.
• The British post-war welfare state after the Beveridge Report (1942) combined universal health care with flat-rate benefits.
• Sweden and Denmark built the social democratic model from the 1930s to the 1970s.
• Authoritarian states have built welfare institutions too, from Bismarck's Germany to East Asian and Gulf states, often to secure loyalty.

Feminist scholars argued that the typology ignored unpaid care work and the family. Others proposed further worlds: a Southern European regime with strong family roles, and an East Asian "productivist" regime subordinating social policy to growth. Many countries are hybrids, and welfare states have changed since 1990.

The typology remains the reference point for comparative social policy. The Korpi–Palme paradox has been debated: later studies find that the relationship between targeting and redistribution weakened in the 2000s. Welfare states of all types expanded during the twentieth century and have proved politically resilient.