Assessing the Role of Welfare States in Reducing Inequality and Poverty: Evidence from EU Countries in the Face of Recent Global Crises

This paper examines how different social policy models can reduce inequality and poverty in capitalist democracies, confronting the structural forces that have driven inequality worldwide in recent decades. Building on Korpi and Palme’s well-known "paradox of redistribution," this study contributes to a longstanding debate among social scientists and policymakers: How should welfare states and social policies be designed to most effectively reduce poverty and inequality?

To assess how different configurations of socio-political institutions can counterbalance economic forces, state interventions can be divided into three main components: contributory transfers, non-contributory transfers, and direct taxation. Since contributory transfers (primarily old-age pensions) represent the largest share of public transfers in most countries and are often viewed as deferred wage payments, this analysis focuses on social assistance and taxation, treating contributory transfers as part of market income.

By employing various redistribution and progressivity indices, this paper empirically evaluates the state's capacity to reduce poverty and inequality in European countries—where welfare states have long been established—across two critical periods: the global financial crisis of 2008 and the COVID-19 pandemic. This approach facilitates a comparative analysis of the performance of different social protection models, particularly targeted versus universal approaches, over approximately the last two decades.

In light of this, the original research question is reformulated into two key inquiries: (i) To what extent are different social policy models capable of mitigating the inequality-generating dynamics of the market within the European Union and its member states? (ii) Has this capacity been altered by recent global crises?

This analysis will be expanded in the future to include non-European countries, enriching the debate by examining a broader range of institutional configurations and social models and allowing to show similarities and differences among different conglomerates of EU and non-EU countries.