Person:

Iversen, Torben

In this paper, we address two empirical puzzles: Why are cross-country differences in the division of labour between public and private education funding so large and why are they politically sustainable in the long term? We argue that electoral institutions play a crucial role in shaping politico-economic distributive coalitions that affected the original division of labour in education financing. In proportional representation systems, the lower and middle classes formed a coalition supporting the establishment of a system with a large share of public funding. In majoritarian systems, in contrast, the middle class voters aligned with the upper income class and supported private education spending instead. Once established, institutional arrangements create feedback effects on the micro-level of attitudes, reinforcing political support even among upper middle classes in public systems. These hypotheses are tested empirically both on the micro level of preferences as well as on the macro level with aggregate data and survey data from the ISSP for 20 Organization for Economic Co-operation and Development countries.

We argue that the welfare state operates very differently in the advanced sectors of modern economies and in the low skill sectors. Governments are concerned to promote the advanced sectors of their economies in which they have comparative advantage. This is a valence issue not a partisan one. Where companies and employees in advanced sectors co-invest heavily in company-specific skills, then governments will be concerned to maintain insurance infrastructures to underwrite these investments. Hence in advanced sectors, we see politics for markets in maintaining insurance-based welfare states. In low skill sectors, redistribution and active labor market policies are partisan issues for legislatures, so here our analysis is in line with Politics Against Markets. Effective welfare state policies depend on political coalitions in which the low skilled are represented. We suggest that those coalitions may be less available just as low-skilled workers are increasingly excluded from post-Fordist collective bargaining coverage.