Decentralization and the Welfare State: Territorial Disparities, Regional Governments and Political Parties

The increasing decentralization of policy responsibilities and fiscal authority in EU member states during the last 40 years has important implications for the welfare state and the provision of social services in particular. A number of studies have argued that decentralization increases within-country variation in the provision of social services by enlarging the autonomy of regional governments while other studies claimed that competitive pressures inherent in decentralized systems make regional governments converge to lowest common denominator social policies. This paper examines the conditions under which decentralization leads to more within-country variation in the provision of social services. I argue that only in the absence of centripetal institutions – such as centralized party systems, inter-regional coordination mechanisms, and fiscal equalization schemes - does decentralization lead to increased regional disparities. Furthermore, I argue that decentralization not only allows regional differences in wealth to have a larger impact on the provision of social services, but it also allows for a politicization of regional policy-making. In other words, I hypothesize that partisanship differences at the regional government level matter for social service provision at higher levels of decentralization. This paper presents evidence from a large-N analysis of regional social spending data for 14 established democracies over the last 30 years. The results suggest that a centralized political party system and inter-regional coordination mechanisms not only decrease overall variation in the provision of social services but also dampen the effect of partisanship while fiscal equalization schemes decrease variation without affecting partisanship differences.