Labour Market Risks and Private Social Security

Private social security has gained increasing importance in most advanced western societies over the last few decades. However, this phenomenon seems to be under-analysed in the political economy and welfare state literature. This study aims to explain the variation in the expenditure on private social security across countries and over time. By using voluntary private social expenditure as the dependent variable, this study tests whether economic integration leads to higher demands for social security to compensate for increased economic risks; political mechanisms are not expected to interfere with the relationship. Based on data for 20 OECD countries over the past few decades, the results indicate that increased trade openness is positively related to voluntary private social expenditure. Furthermore, the study finds empirical evidence that the growth of private social security is induced by retrenchments on public welfare state arrangements.