Policy Specific Effects Of Welfare States’ Impact On Social Trust

This paper analyzes the functional dimension which is defined based on the functions social polices perform. Functions are derived on the basis of the risks or contingencies that social policies are designed to cover. The analysis is conducted by relating relevant social expenditures to the levels of institutional and interpersonal trust among their direct recipients. Relevant social expenditures include pension and unemployment spending that are linked to social trust levels among pensioners and the unemployed. The results are compared to those calculated based on the pooled sample for the whole population and total social expenditures. The analysis provides evidence of the existence of policy specific effects. Mixed results were however obtained in the case of the crowding-out hypothesis. An aggregated level of analysis supports crowding-out only for pension spending while positive effects are found for unemployment spending. Moreover, the aggregated-level of analysis suggest that effects of social spending on social trust mainly go through reduction of income inequality, which supports integration argument. If redistributive effects of welfare state activities are controlled for, the direct effect of social spending on social trust becomes negative, which can be explained by the civil society erosion or the moral destruction arguments. The individual level of analysis provides similar evidence. Crowding-out can be expected in the case of pensioners for both forms of social trust, while crowding-in effects can be found in the case of total social spending and unemployment spending. An explanation of these effects among pensioners and the unemployed is provided based on the attitudinal theory of trust formation.