European Journal of Political Research 43: 83105, 2004

83

Welfare regimes and the welfare mix

MARTIN POWELL1, & ARMANDO BARRIENTOS2
1

University of Bath, UK; 2University of Manchester, UK

Abstract. We present a different approach to appraising welfare regimes, stressing different dimensions, variables and techniques to those used by Esping-Andersen in his pathbreaking work entitled The Three Worlds of Welfare Capitalism. First, instead of focusing on
social rights, we construct an alternative path to identifying welfare regimes starting from
the welfare mix. Second, we incorporate active labour market policies (ALMP) as a key
variable of the welfare mix. Third, we use hierarchical and k-means cluster analysis to identify welfare regimes in the data. Fourth, we compare regimes over time. Nevertheless, despite
these different approaches, we conclude, like Esping-Andersen, that there are three clusters
or worlds of welfare capitalism. We also find that the clustering of welfare regimes was
sharper in the mid-1990s as compared to the mid-1980s, but that comparing welfare regimes
in the 1980s with the 1990s indicates strong path-dependence. Faced with high and persistent
levels of unemployment in the 1990s, OECD countries have adopted policies, including
ALMP, which reinforce their welfare mix.

Introduction
Gosta Esping-Andersens (1990) book entitled The Three Worlds of Welfare
Capitalism famously produced a threefold typology of social democratic, conservative and liberal welfare regimes. It has become one of the most central
and most cited contributions to recent comparative social policy, leading to a
protracted debate on what Abrahamson (1999) identifies as the welfare modeling business (see also Castles 1998; OConnor et al. 1999; Bonoli et al. 2000;
Daly 2000; Pierson 2000; Room 2000; Ebbinghaus & Manow 2001; Goodin
2001; Goodin & Rein 2001; Obinger & Wagschal 2001; Wildeboer Schut et al.
2001; Wincott 2001; Arts & Gelissen 2002; Kvist 2002; Pennings 2002).
The purpose of this article is to make a distinctive contribution to the
further development and operationalisation of welfare regime analysis. We
develop a distinctive approach to appraising welfare regimes, stressing different dimensions, variables and techniques. First, we approach welfare regimes
from a direction implied by, but not really followed by, Esping-Andersen
(1990, 1999). Instead of focusing on social rights, we construct an alternative
path starting from the welfare mix. Second, we incorporate active labour
market policies (ALMP) as a key variable. This variable is important as it
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martin powell & armando barrientos

incorporates what is rapidly becoming a key component in welfare production, bridging the worlds of work and welfare. ALMP also help to differentiate more clearly active from passive public interventions. Third, we use
hierarchical and k-means cluster analysis to identify welfare regimes in OECD
(Organisation of Economic Cooperation and Development) countries (cf.
Pitruzzello 1999; Gough 2001; Obinger & Wagschal 2001). Fourth, we compare
regimes over time. A comparison of clusters from the mid-1980s and mid-1990s
shows strong path dependence, suggesting that recent welfare reforms have
reinforced differences in the welfare mix.
The remainder of the article is divided into five sections. The next section
discusses the different worlds of Esping-Andersen, emphasising some relatively neglected features of his 1990 text, and some key differences between
his 1990 and 1999 texts. This is followed by discussion of the new politics of
welfare, highlighting ALMP as a key component of welfare regimes. The next
section presents an empirical analysis of the role of ALMP as a key ingredient of the welfare mix. The final section draws out our main conclusions.

The different worlds of Esping-Andersen

In this section, we focus on two main issues. First, we revisit the relatively
neglected issues of the concepts and methods used by Esping-Andersen in his
identification of welfare regimes, and of the role of the welfare mix in his
analysis. In particular, we argue that much of the subsequent debate has
focused on the concepts of de-commodification and, more recently, defamilialisation, and has neglected the welfare mix as a key component of
welfare regimes. Second, we examine the important, but largely neglected, difference in emphasis between the definition of regimes between 1990 and 1999,
and the central role of social risks and labour market programmes in EspingAndersens later work. This will provide the background to our focus on
ALMP.
Esping-Andersen stresses that his own approach is based on the broad
approach to the welfare state taken by political economy. He offers a reconceptualisation of the salient characteristics of welfare states in terms of social
rights, social stratification and the public-private mix (Esping-Andersen 1990:
Chapters 2, 3, 4). Much of the attention devoted to the book focused on his
first notion of social rights as de-commodification, which refers to the extent
to which a person can maintain a livelihood independently of the market.
Esping-Andersen develops de-commodification scores based on criteria such
as replacement ratios and eligibility conditions for pensions, sickness benefits
and unemployment benefits. These are aggregated into a composite score that
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helps distinguish three worlds (Esping-Andersen 1990: 52). The Scandinavian

countries tend to have the highest scores and the Anglo-Saxon countries the
lowest, with the Continental countries falling between these two groups.
Esping-Andersens second main concern is how the welfare state affects
stratification, or how it reorders social relations. Stratification is measured in
terms of corporatism, etatism, means-testing, private health spending, universalism and benefit equality. Welfare states cluster into three worlds according
to conservative, liberal and socialist regime attributes (Esping-Andersen 1990:
74). His third concern is with private and private provision, or the state-market
nexus, and relying on the private public mix in pension expenditure, he is able
to distinguish three pension regimes.
The three main components of welfare regimes are clearly identified, with
the division of social protection between public and private provides the structural context of de-commodification, social rights, and the stratificational nexus
of welfare state regimes (Esping-Andersen 1990: 80). He further argues that
welfare regimes can be identified on each of these components, or on all three
put together. As he puts it, the clustering along our basic dimensions is both
sufficiently clear on single indicators, and is upheld whether we cumulate different indicators (Esping-Andersen 1990: 88). Along a single welfare regime,
the welfare mix, welfare outcomes and stratification effects are closely associated, and distinctive both individually and in aggregate across welfare regimes.
This seems to suggest that, in terms of identifying welfare regimes, it matters
not where one starts.
While there are close and clear links existing between the different components and their respective indicators, there are also some important conceptual and empirical differences between them. The different components of
the welfare regime interact closely with one another. A specific articulation of
the market, state and family, production of welfare produces specific welfare
outcomes, measured in terms of de-commodification or de-familialism, as well
as specific stratification effects that reinforce the welfare mix, ensuring path
dependence. Nevertheless, conceptually, the welfare mix is the basis upon
which the welfare regime is built. It is also empirically richer in terms of
indicators.
Shalev (1999) states that Esping-Andersens analysis relied very heavily on
the authors judgement, with no systematic test carried out of whether the
ensemble of indicators of welfare regimes actually do hang together. Most
subsequent empirical analysis has focused on de-commodification scores,
but the construction of a de-commodification index and the resulting clusters
they produce are highly contentious (Pitruzzello 1999; Room 2000, EspingAndersen 2000,Arts & Gelissen 2002). In practice, analysis of different welfare
regime components has produced different clusterings. By contrast, this article
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grounds the analysis of welfare regimes on the welfare mix, the articulation of
the markets, the state and the family, in welfare production.
As regards the changes in Esping-Andersens position between 1990 and
1999, most commentators focus on his incorporation of de-familisation on
an equal footing with de-commodification, as a welfare outcome. This is an
important development, but the greater emphasis on social risks and the
welfare mix (as opposed to the narrower public-private mix) in his later
work has important implications for welfare regimes. Social risks and social
risk management do not appear in the index of the 1990 book, but play a
central role in the later text. The welfare state, the family and the market are
seen as three sources of managing social risks, and this is repeated throughout. Welfare regimes must be identified much more systematically in terms of
the inter-causal triad of state, market and family (Esping-Andersen 1999: 35),
and how risks are pooled defines, in effect, a welfare regime (EspingAndersen 1999: 33). It is clear that by making social risks into the organising
concept underlying welfare production, Esping-Andersen has brought the
notion of the welfare mix more centre-stage in his 1999 book. However, while
the conceptual side of the new 1999 position has been clarified and developed,
the empirical identification of regimes still largely rests on the social rights
dimension as measured by de-commodification (1990) with the later addition
of de-famililisation (1999). Both indices are largely uni-dimensional, and
neither measure adequately reflects the new conceptual primacy of the
welfare mix.
Esping-Andersen (1999) identifies three main welfare regimes according
to their specification of social risks, and their articulation of welfare producing institutions and programmes. A liberal regime is characterised by a narrow
specification of social risks, a restricted view of the role of the state and a preference for market welfare production. In the liberal regime, social risks are
perceived as arising from the imperfect operation of markets or market
failure, and welfare programmes are justified only if they address significant
market failures. Welfare provision by the state is restricted to covering bad
risks through needs-based social assistance. Liberal regimes are designed by
market optimists, who believe that economic development will improve the
operation of markets thus reducing market failure and the need for market
intervention. A conservative regime places the family at the centre of welfare
provision. Social risks are defined as those affecting the family, and state and
market welfare provision is designed to respond to family failure. Conservative welfare regimes are stratified by gender and occupation, and are strongly
associated with employment protection. A social democratic regime is characterised by a comprehensive specification of social risks. Social democratic
regimes give human/social development rights centre-stage and aim to
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maximise economic participation. Welfare provision is developmental in

nature and therefore universalistic and egalitarian, with the state having a key
role in welfare production. The welfare mix constitutes the centre of gravity
of welfare regimes.

From the old passive to the new active politics of the welfare state
The original analysis of welfare regimes (Esping-Andersen 1990) is anchored
in the old, passive politics of the welfare state in two senses. First, much of the
data relates to the late 1970s and 1980, at the end of the golden age. Second,
the measures focus largely on income maintenance programmes especially
pension and social security spending. These are essentially passive programmes, reflecting the Keynesian consensus of the post-Second World War
period, and arguably ill-suited for todays very different world (e.g., OECD
1994; Giddens 1998; Esping Andersen 1999; Pierson 2001). Paralleling Pierson
(1996), income maintenance programmes may reflect the old politics of the
welfare state, while the centre of the debate now focuses on preventive and
active measures in the active society (Walters 1997).
A recent agenda for these new times includes a focus on the labour market,
examining clearer links between the economic and the social, and work and
welfare (e.g., Esping-Andersen 1999; Goodin 2001). Recent attempts to bridge
this divide compare welfare regimes with labour market regimes, production
regimes or varieties of capitalism (e.g., Ebbinghaus & Manow 2001; Huber &
Stephens 2001; Wood 2001). However, there are two main problems with this
search for elective affinities. First, comparing regimes with other typologies
still preserves the different spheres. This approach is indirect, and involves
looking for similarities between the two different typologies. We take the
more direct route, and incorporate measures such as ALMP and employment
protection directly into the specification of welfare regimes. Second, these
studies fail to acknowledge the significance of our key measure of ALMP. Shin
(2000) claims that ALMP have become one of the most utilised policy options
in welfare states. They are central to the new discourse of activation and
supply-side policies of national governments, supranational organisations
such as the Organisation for Economic Cooperation and Development
(OECD), the World Bank (WB) and the European Union (EU) (e.g., OECD
1994; see Deacon 1997; Waters 1997; Lodemel & Trickey 2000; Lodovici 2000;
Shin 2000; Sinfield 2001). It also has clear links to debates on workfare
(Torfung 1999a; Lodemel & Trickey 2000), the Schumpeterian postnational
welfare regime (Jessop 1999; Torfung 1999b) and the Third Way (Giddens
1998, 2000, 2001).
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Some important issues remain in the definition and measurement of ALMP

(e.g., Robinson 2000). Sinfield (2001) criticises the simple active/passive
dichotomy as mistaken, misleading and politically loaded. In broad terms,
active policies include measures to improve the access by the inactive or unemployed to the labour market, investment in skills, and generally the functioning of the labour market. These are in contrast to the more traditional passive
income maintenance benefits.
The growth in ALMP expenditure has been less spectacular and consistent
than the discourse suggests (Martin 1998; Robinson 2000). Table 1 shows the
Table 1. Spending on ALMP as a proportion of GDP
Country

1975

1980

1985

1990

1995

Australia

0.3

0.3

0.4

0.3

0.8

Austria

0.1

0.2

0.3

0.3

0.4

Belgium

0.7

1.3

1.2

1.4

Canada

1.1

0.6

0.5

0.5

0.2

0.1

0.5

Czech Republic
Denmark

0.2

1.5

0.9

1.1

1.9

Finland

0.6

0.7

0.9

1.0

1.6

France

0.2

0.3

0.7

0.8

1.3

Germany

0.5

0.6

0.8

1.1

1.3

Greece

0.2

Hungary
Ireland

0.2

1.5

Italy
Japan

0.4

0.7

0.2

Korea
Luxembourg
Netherlands

0.2

0.4

0.9

0.7

New Zealand
Norway

Sweden

1.2

2.1

United Kingdom

0.4

0.7

United States

0.2

0.3

Switzerland

1.4

1.6

1.4

1.1

0.1

0.1
0.1

0.5

0.3

0.2

1.0

1.1

1.3

0.9

0.9

0.7

0.6

0.9

1.3

0.3

0.3

0.6

0.8

0.4

Spain

0.4
0.4

0.1

Poland
Portugal

0.4
0.6

0.3

0.9

0.8

2.2

1.7

2.4

0.2

0.2

0.5

0.7

0.6

0.4

0.1

0.2

0.2

Sources: 1970 and 1980 Janoski (1994); 1985, 1990 and 1995 OECD (2000).
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significance of active labour market policies as measured by spending on active

measures as a share of GDP (gross domestic product). The rise in spending
on ALMP is a feature in most countries, especially in the late 1970s and 1990s.
Martin (1998) finds an increase in spending from 0.7 per cent in 1985 to 0.9
per cent in 1996 across the OECD countries (see also Appendix 1 below). The
simple average of EU countries shows a 30 per cent rise in the 1990s. Due to
the fact that the data for 1975 and 1980 were constructed differently to the
later data, it is difficult to be confident in postulating longer term growth
trends, although the 1980 data are reasonably homogeneous with the 1985 data
from OECD sources. However, this trend hides considerable cross-country
variation. Whereas spending on active measures as a proportion of GDP fell
in the United Kingdom and the United States in the 1990s, it increased significantly in Germany, France, Sweden and Denmark. It is also difficult to
establish whether there is convergence or divergence in ALMP expenditure
across countries, mainly because the sample increases over time. The correlation between the 1985 and 1995 observations is 0.82. The coefficient of variation is 66 in 1985, rising to 72 in 1995, suggesting divergence in expenditure on
ALMP, but if only those countries with recorded expenditure in 1985 are
included in the calculation, the coefficient of variation falls marginally to 64.4
in 1995, suggesting a very weak convergence trend.

ALMP and welfare regimes

There have been few attempts to insert the analysis of ALMP within a welfare
regime approach, and these are reviewed briefly in this section. EspingAndersen (1990: 159) is concerned with welfare-state and labour-market
regimes and welfare-state/labor-market interactions, and therefore ALMP
should be an important component of the welfare mix. Moreover, Germany,
Sweden and the United States are argued to constitute distinct representatives
of our respective welfare-state/labour-market regimes (Esping-Andersen
1990: 192). Moreover, he discusses the strong and significant correlation existing between left power mobilisation, as measured by the share of cabinet seats,
and ALMP expenditure measured as a percentage of GDP for 1975 (EspingAndersen 1990), and stresses the importance of labour markets, but there is
little explicit discussion of ALMP (Esping-Andersen 1999).
Janoski (1994) explicitly discusses ALMP in the context of welfare regimes.
He focuses on three countries Sweden, West Germany and the United States
as representing social democratic, conservative and liberal regimes. He is
able to confirm, within a time series analysis, that spending on ALMP is high
in Sweden, moderate in Germany and low in the United States. He also finds
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that in a cross-section correlation analysis of 18 countries in 1987, social democratic (r = +0.50) and liberal regime countries (r = -0.68) are significantly
correlated with ALMP/GNP (gross national product) spending, but there
was no statistically significant correlation for conservative regime countries
(r = +0.17). Janoski concludes that the political economy of unemployment
clearly fits with the welfare regime types outlined by Esping-Andersen.
Gallie and Paugam (2000) present four unemployment welfare regimes
on the basis of criteria of coverage, level of compensation and expenditure on
ALMP. They argue that expenditure on ALMP is almost non-existent in a subprotective regime, which includes Southern European countries. It is weak in
the liberal regime as demonstrated by the United Kingdom and Ireland, and
extensive in employment-centred regimes represented by France, Germany,
the Netherlands and Belgium. Spending on ALMP is very extensive in the universalistic regime represented by Denmark and Sweden. This typology closely
parallels the four worlds of welfare capitalism that result from adding a separate Southern European model to the three identified by Esping-Andersen
(see Arts & Gelissen 2002) or to the four families of nations identified by
Castles and Mitchell (1993) and Castles (1998). However, the fit is not perfect,
as in 1996 the United Kingdom spent less on ALMP than Spain and Portugal,
and Ireland spent more any of the four employment-centred nations.
Lodemel and Trickey (2000) suggest more of a mixed picture. They
examine data on seven countries for 1999, and find that the two liberal regime
countries have low (United Kingdom) and medium (United States) spending
on ALMP, while the two conservative countries also have low (Germany) and
medium (France) spending. The two social democratic countries show low
(Denmark) and high (Norway) spending. Finally, the Netherlands is classified
as social democratic/conservative, with low spending.
The attempts to incorporate ALMP into welfare regimes suffer from a
number of shortcomings. While acknowledging that ALMP are important in
welfare production, there is little consensus on whether ALMP help distinguish varieties of capitalism, production regimes or labour market regimes,
and how these fit with welfare state regimes (cf. Wincott 2001). There is no
attempt to analyse ALMP as a key component of the welfare mix, or to explore
its relationships with other components of the welfare mix. Our solution is to
incorporate ALMP more directly within the welfare regime approach, as will
be demonstrated in the next section.

Welfare regimes and the welfare mix in OECD countries

In this section we construct welfare regimes based on a different dimension
and using different methods compared to Esping-Andersen (1990). As
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indicated above, our model takes a different route to the well-trodden path of
de-commodification scores, and focuses on the neglected dimension of the
welfare mix. The variables chosen are expected to capture the main components of the welfare mix that is, the articulation of welfare state, market and
household welfare production, and including ALMP.
There has also been an extensive debate over the methods used to
identify welfare regimes empirically. Esping-Andersens methodology relies
largely on a two-stage process of qualitative grouping followed by multiple
regression. This has been criticised in a number of papers (Pitruzzello 1999;
Shalev 1999; Pierson 2000), and has led commentators to suggest the use of
alternative techniques to identify welfare regimes (see Arts & Gelissen 2002).
Shalev (1999) used multidimensional scaling and principal components analysis. Wildeboer Schut et al. (2001) used non-linear principal components analysis. Kvist (2002) and Pennings (2002) made use of fuzzy sets. However, cluster
analysis has proved the most effective and widely used technique to identify
welfare regimes (Pitruzzello 1999; Gough 2001; Obinger & Wagschal 2001).
Cluster analysis is a heuristic technique to explore patterns of similarity and
dissimilarity in the data, and lends itself particularly well to the task at hand.
It is much less effective than multivariate statistical techniques in an hypothesis testing context. According to Gough (2001: 169), cluster analysis is robust,
meaningful and simple.
The approach will therefore be to cluster countries using variables capturing the welfare mix. Cluster analysis is used to impose structure on the data,
and the selection of routines and variables is crucial. The routine chosen
operates by computing z-scores for the variables, computing the means of
the clusters within each variable, and then computing the distance of each
case to the centre of the cluster (squared Euclidean distance is defined as
D2 = (xik - xjk)2, where i an j are cases, and xik is the value of the kth variable for the ith case). Hierarchical cluster analysis combines cases into clusters, and these clusters are then further combined. In the analysis below,
clusters are combined so as to minimise the squared errors of the withincluster distance (the error sum of squares, ESS = x2i - 1/n (xi)2, where xi is the
score of the ith case this is referred to as the Ward method). An advantage
of hierarchical cluster analysis is that the number of clusters generated at each
stage is data-determined. A disadvantage is that the initial cluster allocation
of cases is not reviewed in further stages. On the other hand, iterative partition clustering methods allow cases to be recombined at each stage, and the
analysis below will also make use of k-means clustering. With this technique,
cases are assigned to the nearest centre, but then the centres are recalculated
and the cases reallocated. This iteration continues until there is no change in
the computed centres. A disadvantage with k-means clustering is that the
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number of clusters is user-defined. The analysis below will use hierarchical

clustering to identify clusters and cluster membership and, with this information in hand, it will use k-means clustering.
The welfare mix is represented in the analysis below by data on public
spending on social security (socsec), education (education) and active labour
market policies (active) as a proportion of GDP (sources: OECD 2000; ILO
2000; UNDP 2000). Data for active labour market policy expenditure has been
taken from the OECD Social Expenditure Database released in 2000. Other
researchers in the area have made used of these data and found it reasonably
reliable (Castles 2001; Pennings 2002). Two other variables used are private
insurance premia (insurance) as a proportion of GDP (source: OECD 1996),
a measure of household expenditure on private insurance and an index of the
strictness of employment protection (strictness). This was developed by the
OECD to capture the multi-dimensional nature of employment protection
(Grubb & Wells 1993). It incorporates information on procedural constraints
on termination, required period of notice and severance pay, and difficulty of
dismissal (source: OECD 1999).
The variables were selected to provide a reliable measure of the different
components of the welfare mix in the context of the provision of insurance
against social risks. As discussed above, in Esping-Andersens (1999) later
text, social risks provide the underpinning for the structure and articulation of
state, market and family welfare production. The specification of social risks
is a key discriminator of welfare regimes. Social security expenditure and
public education expenditure as a proportion of GDP capture state forms of
insurance against social risks, both responsive (social security) and prospective (education). The index of strictness of employment protection and active
labour market policy spending capture labour market protection against
employment-related social risks. Employment protection regulations are
intended to encourage longer term employment relationships, thus preventing
repeated exposure to unemployment and fostering employer investment in
skills. Private insurance premia as a proportion of GDP is intended to
capture, however inadequately, household and insurance market provision of
protection against risk. The variable captures the development of market
insurance.
The variables chosen therefore cover the main components of the welfare
mix; they are also, as a set, a good discriminator of welfare regimes because
they measure different countries specification of social risks along a continuum. Liberal welfare regimes, for example, are expected to exhibit high
relative levels of private insurance expenditure and low relative levels of
employment protection. Conservative welfare regimes should show high
relative levels of employment protection. Social democratic welfare regimes
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are expected to have high relative levels of active labour market policy expenditure and correspondingly lower relative levels of private insurance expenditure. The range of variables selected provides, as a set, appropriate indicators
for the different components of the welfare mix.
The specific role of ALMP within welfare regimes is investigated by clustering countries using measures of the welfare mix excluding ALMP, and then
finding out what changes if any are produced by adding ALMP to the variables used. This is a fairly simple way to ascertain what effect the addition of
spending on active labour market policies has on the capacity of the model to
discriminate welfare regimes. Figure 1 shows the process of aggregation using
data for the 1990s for the variables listed above, and excludes the variable
active. Figure 2 shows the same process with active included.
Hierarchical clustering begins with as many clusters as there are cases, and
gradually joins those showing the shortest distance, until these are all in one
cluster. The dendogram shows this process of aggregation from right to left in
the figures. A critical issue is how to determine the number of clusters that
best represents the structure of the data. In the dendogram, this implies finding
a point at which the process of aggregation must be stopped. The lengths of
the horizontal lines linking clusters show how dissimilar the merged clusters

Rescaled Distance Cluster Combine

C A S E
Label

Num

0
5
10
15
20
25
+---------+---------+---------+---------+---------+

France
12
Germany
13
Finland
7
Netherlands
14
Denmark
6
Belgium
11
Norway
8
Austria
10
Australia
1
Canada
2
Ireland
3
Sweden
9
Portugal
15
Spain
16
Greece
18
United States 5
Switzerland
19
United Kingdom 4
Japan
17

Figure 1. Hierarchical cluster analysis: Dendrogram using Ward Method and variables
seosec96, education96, insurance94 and strictness90.
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Rescaled Distance Cluster Combine

C A S E
Label

Num

0
5
10
15
20
25
+---------+---------+---------+---------+---------+

Germany
13
Netherlands
15
France
12
Italy
14
Spain
17
Austria
10
Greece
19
Belgium
11
Portugal
16
Finland
7
Norway
8
Denmark
6
Sweden
9
Canada
2
New Zealand
20
United Kingdom 4
Switzerland
21
Australia
1
United States 5
Ireland
3
Japan
18

Figure 2. Hierarchical cluster analysis: Dendrogram using Ward Method and variables
socsec96, education96, insurance94, strictness90 and active95.

are, and therefore lengthier lines show greater dissimilarity. In Figure 1, for
example, the structure of the data is best captured by three clusters because,
after the value of 10 in the horizontal scale at the top, further mergers involve
very dissimilar clusters.1 This is an appropriate point at which the aggregation
must stop. In Figure 2, again, three clusters best represent the structure of the
data.
The joining of cases (countries) provides information on how close
their variable values are. In Figure 1, the social democratic welfare regime
countries identified by Esping-Andersen (Denmark, Sweden, Finland,
Norway) are not sufficiently closed together, although the basis of a liberal
welfare regime can be observed (United Kingdom, United States) a
number of countries associated with this welfare regime are elsewhere
(Ireland, Australia, Canada, New Zealand). In Figure 2, after including the
variable active, the expected clusterings around the liberal, conservative
and social democratic welfare regimes are distinctive. The three resulting
welfare regimes conform very closely with the expectations from EspingAndersens model.
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This analysis gives two fairly clear conclusions. First, introducing a measure
of spending on ALMP helps to distinguish welfare regimes more clearly.
Second, it is a three cluster solution. The data used by Esping-Andersen (1990)
covered 18 countries (including Italy), but his results are repeated using data
from the 1990s for 20 countries. Our results give only limited support to writers
who have suggested that a Southern model exists including countries such as
Italy, Spain, Portugal and Greece (see Arts & Gelissen 2002); or the family of
nations grouping proposed by Castles and Mitchell (1993) and Castles (1998)
and supported by Obinger and Wagschal (2001). Introducing ALMP does
result in a sub-group under the conservative cluster including the Southern
Mediterranean countries listed above, but their similarities to the conservative welfare regime are close enough to reject the presence of two separate
clusters (a t-test of the standard deviate estimated at the four cluster stage is
marginally rejected at the 10 percent level of significance).
It is instructive to trace changes in clustering using the same variables over
time. Figure 3 shows the results from a similar clustering exercise using data
points for the same variables in the mid-1980s. This clustering fails to produce
a clear view of the three welfare regimes identified in Esping-Andersen. Both
conservative and social democratic welfare regime countries are lumped

Rescaled Distance Cluster Combine

C A S E
Label

Num

0
5
10
15
20
25
+---------+---------+---------+---------+---------+

France
12
Germany
13
Finland
7
Netherlands
14
Denmark
6
Belgium
11
Norway
8
Austria
10
Australia
1
Canada
2
Ireland
3
Sweden
9
Portugal
15
Spain
16
Greece
18
United States 5
Switzerland
19
United Kingdom 4
Japan
17

Figure 3. Hierarchical cluster analysis: Dendrogram using Ward Method and variables
socsec85, education85, insurance87, strictness80 and active85.
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martin powell & armando barrientos

together in one cluster, with the core of a liberal regime (United States, United
Kingdom) in another, and Southern Mediterranean countries in a third one
(Portugal, Spain, Greece).
A comparison of Figures 2 and 3 confirms that the welfare regime distinction is sharper in the mid-1990s compared to the mid-1980s. Combined with
the finding that ALMP is an important discriminator of welfare regime clusters, it can be concluded that the growth of ALMP over time has served to
reinforce welfare regimes, suggesting welfare regime path dependence
(Esping-Andersen 1999; Liebfried 2001; Pierson 2000, 2001). Faced with rising
unemployment in the 1990s, OECD countries have responded with policy
interventions that strengthen their welfare mix, rather than adopting a
common strategy. In addition, the comparison suggests that Southern Mediterranean countries have become more similar to conservative welfare regime
countries over the late 1980s and 1990s.
The analysis now turns to k-means clustering. The information provided
by the hierarchical clustering suggests three clusters best reflect the structure
of the data. The k-means technique now permits the recombination of
clusters at each stage. The results are very much in line with those of the
hierarchical clustering. Table 2 summarises the output from the analysis
of the 1990s data. Panel A shows cluster membership first excluding the
active variable, and then including it. The inclusion of the active variable
contributes to a clearer identification of the clusters along the lines suggested
by Esping-Andersen, and helps to distinguish more clearly between social
democratic and conservative countries. This is confirmed by the measure of
the distances between clusters in Panel B, because the inclusion of the active
variable increases the estimated distances between the social democratic
and conservative clusters, and between the social democratic and liberal clusters. Panel C shows cluster centres by variable in order to assess how well the
variables chosen discriminate between clusters. As can be seen from the
figures, the rankings of the cluster centres by variable correspond to reasonable expectation from the welfare regime approach. The social democratic
cluster is ranked highest for the active variable, as well as for the socsec and
education variables; while the liberal cluster ranks highest for the insurance
variable and the Southern European cluster for the strictness variable. The
cluster rankings by variable provide further support for the welfare regime
approach.
The results of both the hierarchical and k-clustering include some rogue
classifications, in terms of the expectations from Esping-Andersens welfare
regime memberships. In all, and bearing in mind that cluster analysis is a
heuristic device that is sensitive to the selection of routines and variables,
our main conclusion is that the identification of the welfare regimes using
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welfare regimes and the welfare mix

97

Table 2. Output from k-means cluster analysis on 1990s data

Panel A. Change in clusters when including active variable
Clustering excluding active
variable

Clustering including active

variable (changes in bold)

Social democratic
Denmark
Finland
Sweden
Norway
Australia
Germany
France
Netherlands
New Zealand

Conservative
Italy
Portugal
Greece
Spain

Liberal
Austria
Ireland
United States
United Kingdom
Canada
Switzerland
Japan
Belgium

Finland
Denmark
Sweden
Norway
France
Netherlands

Italy
Portugal
Greece
Spain
Germany
New Zealand
Belgium
Austria

Australia
Ireland
United States
United Kingdom
Switzerland
Canada
Japan

Conservative
2.70
2.54

Liberal
2.55
3.36

Conservative
-0.03
-0.46
-0.66
0.48
0.03

Liberal
-0.97
-0.13
1.06
-1.04
-0.38

Panel B. Estimated distances between cluster centres

Distance between clusters
excluding active variable
including active variable

Social democratic
2.16
2.31

Panel C. Cluster centres by variable

Socsec96
Education96
Insurance94
Strictness90
Active96

Social democratic
1.13
0.96
-0.05
0.25
1.25

Note: F tests of the variables performed for descriptive purposes only show that they are
significant at 1 per cent, except Education96 which is significant at 2 per cent.

variables aiming to capture the welfare mix, including ALMP, broadly substantiates the general approach of constructing welfare regimes from measures
of the welfare mix.
It is important to have in mind that the variable active constitutes an aggregate of expenditure on ALMP. These conflate expenditure on the administration of programmes, training, youth programmes, subsidies to private sector
jobs, job creation in the public sector and expenditure on disabled people. It
would be useful to establish whether decomposing aggregate ALMP spending
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martin powell & armando barrientos

changes the results of our analysis. An important point made by EspingAndersen (1990) was that the content or texture of a welfare state is more
important than measures of spending or welfare effort. Figure 4 shows the
decomposition of ALMP spending for a selected group of countries representing the different welfare regimes.
Spending on public employment is a key component in liberal regime countries. This category includes two items of expenditure: spending on job search
support and on administration. Higher spending on administration is likely to
be a feature of programmes with a workfare or residual nature (Lodemel &
Trickey 2000). Spending on training is not a very effective discriminant of
welfare regimes, but it is highest in social democratic and Southern Mediterranean countries. As regards the latter group of countries, this may reflect
demographic factors, as is clearly the case with the share of spending on youth
measures. As expected, direct job creation in the public sector is a more significant component in social democratic and conservative regimes than in
liberal regimes. The share of spending on disabled programmes reflects a
greater concern with the implementation of universal developmental rights.
Using k-means clustering, the potential role of differences in the share of
components of ALMP in distinguishing welfare regimes is investigated by
replacing the variable active with the percentage of ALMP spending on programme administration, training, youth measures and the disabled. The results
are presented in Table 3.
Using these components, the clustering of liberal and social democratic
welfare regimes is relatively unchanged. Many of the generalisations based on
Figure 4 find support in the clustering exercise. The liberal cluster is ranked
highest along the administration variable, and the social democratic cluster is
ranked highest for the disabled spending variable. The conservative cluster
fares best on the training and youth measures variables. These findings broadly
support our previous generalisations from the sub-sample of countries.

Conclusions
We have constructed welfare regimes for OECD countries using a different
dimension, key variable, methods and time scale as compared to the original
three worlds of Esping-Andersen (1990). Our main conclusions follow from
each of these differences. First, we argued that the identification of welfare
regimes must focus on the welfare mix, the articulation of markets, state and
family welfare production. At a conceptual level, the welfare mix addresses
the specification of social risks that are at the core of Esping-Andersens
reformulation of welfare regimes (1999). At the empirical level, measures
European Consortium for Political Research 2004

0%

20%

40%

60%

Share of total ALMP spending

Figure 4. Share of components of ALMP for selected countries, 1996.

Source: Martin (1998).

Denmark

Sweden

Germany

Netherlands

Portugal

Spain

United Kingdom

United States

80%

100%

Measures for the disabled

Direct job creation in the public sector

Subsidies to private sector employment

Youth measures

Labour market training

Public employment system administration

welfare regimes and the welfare mix

99

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martin powell & armando barrientos

Table 3. Output from k-means cluster analysis on 1990s data, including decomposed ALMP
spending variables
Panel A. Clusters
Cluster membership

Social democratic
Denmark
Sweden
Norway
Netherlands

Conservative
Greece
Germany
Australia
Portugal
France
Spain
New Zealand
Finland

Liberal
Austria
Ireland
United States
United Kingdom
Canada
Belgium

Conservative
2.63

Liberal
3.76

Conservative
-0.18
0.82
-0.03
-0.45
-0.53
0.49
0.04
-0.00

Liberal
0.43
-0.24
-0.24
-0.33
0.80
-1.26
-0.64
-0.18

Panel B. Estimated distances between cluster centres

Distance between clusters

Social democratic
2.95

Panel C. Cluster centres by variable

Admin96
Training96
Youth96
Disabled96
Insurance94
Strictness90
Socsec96
Education96

Social democratic
-0.71
-0.30
-0.64
1.58
0.00
0.35
1.35
1.07

Note: F tests performed on the variables for descriptive purposes only show that
Strictness90, Socsec96 and Disabled96 are significant at 1 per cent; Insurance96, Admin96
and Train96 are significant at 10 per cent.

of the welfare mix are richer, and less contentious, than measures of decommodification and de-familialism. Our implementation of this approach has
been supported empirically. Second, we have made a strong case for the integration of ALMP in the appraisal of welfare regimes, as a key component of
welfare production, and indicative of active, as opposed to passive, welfare
production. Including ALMP expenditure as a variable helps to achieve a
clearer identification of welfare regime clusters. This implies that ALMP
should not be examined in isolation, simply as a response to unemployment,
but should be located within their broader regime type with attention paid to
the interactions with the other elements. Third, we have used hierarchical and
k-means clustering techniques to identify welfare regimes in the OECD. With
the caveat that cluster analysis is essentially a heuristic device, we have been
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welfare regimes and the welfare mix

101

able to produce a simple and reasonably clear typology. Fourth, the clustering
of welfare regimes was sharper in the mid-1990s as compared to the mid-1980s.
Comparing the 1980s and the 1990s shows strong path-dependence in welfare
regimes. There are few signs of convergence. Faced with high and persistent
levels of unemployment in the 1990s, countries have adopted policies, including ALMP, which reinforce their welfare mix. Nevertheless, the resulting three
worlds are very much in line with Esping-Andersens typology.
The three worlds have dominated the comparative welfare state literature
for over a decade. Despite major differences in approach compared to EspingAndersen, we claim that this much disputed number is at least as good as any
other solution. However, there still remain enough loose ends in both conceptual and methodological issues to keep the debate alive for a long time to
come.

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 European Consortium for Political Research 2004

Source: Martin (1998).

Italy
Spain
France
Denmark
Austria
Australia
Canada
United Kingdom
Netherlands
Ireland
Belgium
United States
Japan
Greece
Luxembourg
Germany
Finland
Switzerland
Portugal
Norway
New Zealand
Sweden
Czech Republic
Hungary

Country

29
36
15
43
39
5
9
4
11
37
16
12
17
26
11
13
26
42
10
18
21
71
30
7

Public employment
system administration
18
38
13
22
20
51
33
16
23
35
20
29
32
9
37
52
24
28
3
46
13
5
30
7

Labour
market
training

30

9
50
13

7
5
14
26
15
7
13
5
5
2
6
19
5
7
34
12

Youth
measures
11
10
15
1
2
5
6
5
11
5
8
15
7
9
8
14
48
20
20
14
2
5
15
31

Subsidies to
private sector
employment

Appendix A: Breakdown of spending on active measures 1996 (percent)

1
4
29
10
25
21

27
6
38
2
3
13
32
8
19
8
41
17
21
10
3
7
2

Direct job
creation in the
public sector

8
5
5
6
21
20
7
52
31
13
10
7
19
39
7
2
1
1
16
4
35
3

Measures for
disabled
people

102
martin powell & armando barrientos

welfare regimes and the welfare mix

103

Note
1. This follows the Mojena and Wishart stopping rule which uses the agglomeration coefficients of the clustering process as a series and calculates its mean and standard deviation. The stopping rule states that the optimal partition of a hierarchical clustering
solution is selected that satisfies the inequality zj+1 > z + ksz where z is the value of the
coefficient, k is the standard deviate and sz is the standard deviation of the coefficients
(Aldenderfer & Blashfield 1984). A t-test can be performed on the standard deviate.
These procedures were implemented on the data and confirm the selection of three
clusters.

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Address for correspondence: Martin Powell, Department of Social and Policy Sciences, University of Bath, Claverton Down, Bath BA2 7AY, UK
Tel.: +44 (0)1225 383585; Fax: +44 (0)1225 386381; E-mail: hssdmp@bath.ac.uk

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