Social Cohesion and Support for the Welfare State during the Financial Crisis

We outline a theoretical framework to understand how support for the welfare state is affected by the shocks to the unemployment rate, earnings, and state revenue during the Financial Crisis. We emphasize how the economic interests of different groups change in response to the shocks and how the social cohesion underlying the support for the welfare state might be eroded. Since Alesina and Glaeser (2004) the role of immigration and ethnic heterogeneity has played a prominent role in the welfare state literature and we relate this literature to our framework on the importance of economic shocks for social cohesion. We confront the theoretical framework with data on the development of support for the welfare state during the recession, using data from six rounds of the European Social Survey, 2002-2012. We examine not only aggregate changes, but also examine changes within and across different socio-economic groups, such as low- and high-skilled respondents.