Social Policy in Developing Countries

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Social Policy in Developing

Countries

Isabela Mares

and Matthew E. Carnes

Department of Political Science, Columbia University, New York, New York 1007;

email: [email protected]

Department of Government, Georgetown University, Washington, District of Columbia

20057; email: [email protected]

Annu. Rev. Polit. Sci. 2009. 12:93–113

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Key Words

social protection, welfare state, reform

Abstract

Drawing on recent work and data on social protection in the develop-

ing world, this essay evaluates the current state of the art and suggests

several important new lines of research. We ﬁrst examine the historical

origin and evolution of social protection systems in developing coun-

tries, arguing that insufﬁcient attention has been paid to the authoritar-

ian roots of developing nations’ social policy. As a preliminary effort to

remedy this shortcoming in the literature, we offer a political logic for

the observed variation in the character of institutions of social policy es-

tablished by nondemocratic regimes. Next, we explore recent research

examining linkages between models of economic development and wel-

fare regimes in developing countries. Finally, we turn to the study of the

political determinants of the social policy reforms that occurred in the

ﬁnal decades of the twentieth century, arguing that variation in reform

across policy areas has been more complex than is generally appreci-

ated in the literature. To explain this variation, we develop a theory that

identiﬁes the political coalitions supporting different policy outcomes.

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INTRODUCTION

Our understanding of the development of poli-

cies of social protection is uneven across the

regions of the world. We know a great deal

about the causes and distributional implica-

tions of social policies in developed countries

(Esping-Andersen 1990, Huber & Stephens

2001). By contrast, our grasp of the variation in

the design and economic consequences of so-

cial policies in developing economies is sketchy

and preliminary. Although the study of social

policies in countries outside the OECD is a

rapidly growing area of research (Wong 2003;

Weyland 2005, 2007; Segura-Ubiergo 2007;

Brooks 2008; Haggard & Kaufman 2008), po-

litical science as a ﬁeld is far from understanding

the variation in the character of social protec-

tion and the political factors that have caused

these outcomes.

A ﬁrst striking indicator of the incomplete-

ness of our knowledge is the absence of ba-

sic descriptive information regarding the cross-

national and temporal variation in the level of

social protection. In many developing coun-

tries, the introduction of social policy legis-

lation occurred in the early or middle twen-

tieth century, yet we still lack reliable data

on the implementation of these policies, the

scope of coverage, or the levels of beneﬁts. In

some cases, social policy legislation provided

genuine protection to many citizens for vari-

ous employment-related risks. In other cases,

however, such measures were no more than

promises that were not fulﬁlled or that were

implemented in a highly discretionary fash-

ion. For example, according to data on “ofﬁ-

cial” levels of social protection recorded by the

Social Security Administration of the United

States, 40 sub-Saharan countries had policies of

old-age and disability insurance in place, with

“promised” levels of social protection roughly

comparable to that found in economies with

much higher levels of economic development

(Social Security Administration 1999). Yet this

information on social policy commitments is

clearly contradicted by case studies of the im-

plementation of these policies. Similarly, in

Latin American countries, governments have

reneged on multiple occasions on many of the

social policy promises enshrined in their leg-

islation. In both regions, highly uneven social

protection resulted because governments either

lacked the administrative capacity to enforce

contributions to social insurance or deliberately

chose to manipulate social insurance to beneﬁt

particular sectors.

A second shortcoming of the existing

research is the absence of systematic cross-

national and temporal data on the implementa-

tion and design of social policies. This has hin-

dered our understanding of the distributional

impact of social policies andtheir effects on eco-

nomic and labor market outcomes, such as the

level of employment, overall labor force par-

ticipation rates, and economic growth (Mares

2007a). Consider for example the relationship

between the level of social protection and the

size of the informal economy. Since the inﬂu-

ential paper of Harris & Tadaro (1970), social

security contributions and other labor market

regulations have been argued to be the main

cause of labor market “dualism” in many devel-

oping countries, segmenting employment be-

tween secure, higher-paid jobs in the formal

sector and precarious, lower-paid informal jobs.

High social security contributions and above-

market-clearing wages were theorized to force

workers to queue for jobs in the formal sec-

tor and subsequently shunt many workers into

the informal economy. However, a growing

amount of empirical evidence raises signiﬁcant

doubts about the explanatory power of this re-

ceived wisdom. For example, over the past two

decades, lack of enforcement of minimum-wage

legislation in many Latin American countries

has resulted in a tremendous downward ﬂex-

ibility of wages in the formal sector. At the

same time, many social insurance programs

have been dismantled or have experienced se-

vere cutbacks. Yet despite these changes, we see

no decline in the size of the informal economy

across the region. By 2005, the best estimates

show that 50% of all salaried workers in Latin

America continued to work informally (Galiani

94 Mares

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& Weinschelbaum 2006). These results call into

question the expected positive relationship be-

tween social insurance expansion and informal-

ity, leaving us with no convincing alternative

theory of the factors that cause variation in the

size of the informal sector.

Third, many developing countries have ex-

perienced tremendous social policy change

in recent decades. Countries as diverse as

Thailand and Bolivia have enacted a wide range

of social policy reforms—modifying the level of

insurance coverage, the eligibility conditions,

and the mix between private and publicly pro-

vided beneﬁts received by their citizens. How-

ever, the direction of these changes is still in-

sufﬁciently understood (Mares 2007b). Have

welfare states around the world been driven

by the competitive concerns of globalization to

adopt “residualistic” models, characterized by

narrow social insurance coverage and a strong

reliance on private-type institutions of social

protection? Do we ﬁnd signiﬁcant differences

across policy areas in the direction and mag-

nitude of policy change? Have some particular

subsystems of the welfare state been more vul-

nerable to retrenchment than others? Although

the study of the recent politics of welfare state

adjustment in developing countries has been a

rapidly growing area of research in recent years,

many puzzles remain. We have an insufﬁcient

understanding of the variation in the distribu-

tional implications of policy changes enacted in

recent years. Existing studies do not adequately

explain the strong divergence across policy ar-

eas (often within the same country); we need

an explanation that is grounded in a coherent

micro-logic and can account not only for the

preferences of political and bureaucratic elites

but also for the preferences of organized groups

and mass publics.

Fourth, the empirical bias that has char-

acterized the existing literature on compara-

tive systems of social protection has limited the

efforts of scholars to test competing explana-

tions against each other. Most of the explana-

tions that seek to account for cross-national dif-

ferences in the level of social protection have

only been tested in a narrow subsample of

countries that covers 14–18 OECD economies.

In this limited universe of cases, the theo-

retical variables that are considered important

determinants of the trajectory of social pol-

icy development—such as the strength of left-

wing partisanship, the organizational density of

business and labor, and the type of electoral

system—are highly correlated with each other.

As a result, many quantitative studies of the de-

terminants of social protection in advanced in-

dustrialized countries leave out important ex-

planatory variables and are unable to test all

relevant competing theories against each other.

Broadening our sample size by including de-

veloping countries allows us to overcome prob-

lems of multi-collinearity and to include a larger

number of potential explanatory variables in

our estimations. A study of policies of social

protection with a broader empirical scope can

have important theoretical externalities.

Drawing on recent work and data on so-

cial protection in the developing world, this

article evaluates the current state of the art

and suggests several important new lines of re-

search. We ﬁrst examine the historical origin

and evolution of social protection systems in

developing countries, arguing that insufﬁcient

attention has been paid to the authoritarian

roots of developing nations’ social policy. As

a preliminary effort to remedy this shortcom-

ing in the literature, we offer a political logic

for the observed variation in the character of

institutions of social policy established by non-

democratic regimes. Next, we explore recent

research examining linkages between strategies

of economic development and welfare regimes

in developing countries. This represents a novel

agenda of research, paralleling the latest re-

search on social policy in advanced industrial-

ized societies. However, it requires better speci-

ﬁcation of its micro-foundational logic. Finally,

we turn to the study of the political determi-

nants of the social policy reforms that occurred

in the ﬁnal decades of the twentieth century,

arguing that variation in reform across policy

areas has been more complex than is gener-

ally appreciated in the literature. To explain this

variation, we develop a theory that identiﬁes the

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Social Policy in Developing Countries 95

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political coalitions supporting different policy

outcomes.

THE HISTORICAL ORIGIN

OF SOCIAL POLICIES IN

DEVELOPING COUNTRIES:

THE UNEXPLORED POLITICAL

LOGIC OF AUTHORITARIAN

GOVERNMENTS

The ﬁrst generation of research examining the

variation in social policy has explored the im-

pact of underlying structural variables—such as

the level of economic development or the level

and speed of industrialization—on the level

of social spending. For economists, the mech-

anism linking higher economic development

and higher levels of social spending goes back

to Wagner’s observation that spending on so-

cial transfers rises as incomes rise. This pos-

itive income elasticity of government trans-

fers is expected to account both for the steady

growth of social spending and for the observed

cross-national variation. Political scientists, by

contrast, emphasize the new needs and vulner-

abilities in the economy created by the pro-

cess of industrialization. Early empirical work

on OECD countries found a positive correla-

tion between the level of industrialization or

economic development and aggregate social

spending (Wilensky 1975). However, the rela-

tionship between economic development and

the size of the government or the level of gov-

ernment revenues does not prove to be ro-

bust in a broader sample that includes devel-

oping countries (Adsera & Boix 2002, Mares

2005a). Economic development does not seem

to explain much of the variation in spend-

ing among developing countries. The short-

comings of these variables point to the need

to consider political determinants of social

policy.

Among the latter, perhaps the most stud-

ied question in the literature has been the re-

lationship between regime type and the size of

the government. Typically, this work has argued

that democracies, owing to their need to cater

to a broad electoral base, will have more ex-

tensive social policy commitments. The logic

is that competition among political candidates

will lead to social policy expansion to reach new

groups of voters. Likewise, democratic free-

dom permits interest group organization and

pressure for the increase of social spending

(Haggard & Kaufman 2008). Although some

disagreement exists (Mulligan et al. 2003), the

quantitative literature seems to support this

contention that democracies spend more than

nondemocracies on particular social programs

(Przeworski et al. 2000, Lake & Baum 2001,

Avelino et al. 2005).

Within democracies, we now know a great

deal about patterns of social spending and pol-

icy, especially in developed economies. For ex-

ample, left-wing, labor-associated governments

are more likely to undertake greater social

spending (Esping-Andersen 1990, Huber &

Stephens 2001); yet, these effects are more

pronounced in the formative years of labor-

associated parties than in the later, reform

period—in which these parties have often pro-

tected their core constituencies of “insiders” at

the cost of the broader working class (Rueda

2005). On the other side of the political spec-

trum, employers and associated parties on the

right are not univocally opposed to social

policy expansion. Under certain conditions—

such as increased economic competition or

the presence of industrial risks in the produc-

tion process—ﬁrms may support government-

administered social protection schemes and

thus enter into cross-class alliances with work-

ers (Mares 2003, 2005a; Swenson 2002).

However, one signiﬁcant weakness of this

literature is its binary distinction between

democracy and nondemocracy. This blunt di-

chotomy misses the important variation in so-

cial spending and social policy design within

regime types. More fundamentally, even when

variation in regime types appears to account for

differences in the growth of social policy ex-

penditures, it cannot explain the political ori-

gin of social insurance programs. As Esping-

Andersen (1990, p. 15) pointedly remarks, “the

thesis that democracy leads to larger welfare

states confronts the historical oddity that the

96 Mares

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Table 1 Regime type at time of ﬁrst adoption of social insurance policies, by region

∗

Region Regime type Old age Disability Sickness Unemployment

Latin America authoritarian 12 16 13 0

democratic 2 3 1 3

Advanced industrialized nations authoritarian 7 8 7 2

democratic 15 14 13 19

Eastern Europe authoritarian 9 7 8 2

democratic 0 2 1 2

Africa authoritarian 3 4 3 1

democratic 0 0 0 0

Middle East authoritarian 5 8 3 –

democratic 1 0 0 –

Asia authoritarian 4 9 2 –

democratic 2 2 3 –

TOTAL authoritarian 40 52 36 5

democratic 20 21 18 24

∗

Sources: Flora & Heidenheimer 1981; Mares 2005a; U.S. Social Security Administration, Social Security Programs

Throughout the World, various years.

ﬁrst major welfare state initiatives occurred

prior to democracy and were powerfully moti-

vated to arrest its realization.” In the European

context, nondemocratic regimes—such as those

of Bismarck in Germany and von Taaffe in

Austria—pioneered social insurance legislation,

and the expansion of social programs often oc-

curred under conditions of limited suffrage.

One quantitative analysis of the evolution of so-

cial spending in Europe during the last decades

of the nineteenth century and the ﬁrst two

decades of the twentieth century suggests that

variables capturing differences in the type of

democracy can account for only very small dif-

ferences in social spending (Lindert 1994).

In the case of developing countries, regime

type even more strikingly fails to account for

differences in the origin of social programs.

Here, the overwhelming number of social in-

surance programs were initially adopted by

nondemocratic governments. Table 1 presents

data on regime type at the time of the adoption

of different social policies. Several regional pat-

terns stand out. In Europe and North America,

the majority of policies were adopted by democ-

racies. Only one third of the earliest measures

(disability, old age, and sickness) were instituted

under autocracies. We ﬁnd the opposite pat-

tern when we move to different regions of the

world. Disability insurance, to cover workplace

injuries that could leave workers incapacitated,

was often the ﬁrst policy adopted and is the

most prevalent policy cross-nationally. How-

ever, of the 73 countries included in this sample,

>70% were autocracies at the time of adoption.

And when the advanced industrialized nations

are removed from the total, fully 88% of de-

veloping nations adopted disability insurance

under authoritarian rule. Both old-age insur-

ance and sickness insurance show similar pat-

terns, with twice as many autocratic nations in-

stituting these programs as democracies. The

only departure from the pattern of authoritar-

ian ﬁrst-adoption has been unemployment in-

surance. Far more limited cross-nationally, un-

employment insurance is largely restricted to

the advanced industrialized nations, and thus

was adopted primarily under democracies.

Nondemocratic regimes have adopted so-

cial insurance programs that vary dramatically

in the scope of insurance coverage, the ag-

gregate level of beneﬁts, and the composition

of those beneﬁts. In some cases, authoritarian

governments have designed policies to serve

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extremely narrow political clienteles and have

been able to maintain this narrowness of cover-

age despite rapid economic change and grow-

ing afﬂuence. For example, prior to democrati-

zation in Taiwan, the major old-age insurance

program—the Labor Insurance Act—provided

employment-related beneﬁts to <10% of the

labor force. In contrast, other authoritarian

regimes have chosen to enact universalistic

health care and education systems. For exam-

ple, in Brazil in 1971, the military government

of Emilio Medici presided over a dramatic ex-

pansion of social insurance in the countryside

(Malloy 1979).

Theories linking regime type and social pol-

icy thus need to be grounded in an explana-

tion of the internal political dynamics of these

regimes. Unfortunately, prevailing theories of

autocracies offer very limited guidance in this

effort. Much of the theoretical work on autoc-

racies tends to be taxonomical; it has generated

a long list of possible nondemocratic regime

types (O’Donnell 1979, Linz 2000). These in-

clude “neo-sultanistic, neo-patrimonial, per-

sonal, bureaucratic authoritarian, military, in-

clusive military, exclusive military, single party,

dominant (or hegemonic) party, semiauthor-

itarian, autocratic, and totalitarian—to name

some of the most commonly used categories

of authoritarian government” (Haber 2007,

p. 694). This attention to the diverse institu-

tional shapes of autocracies has proven helpful

in understanding the speciﬁcs of particular

cases, but it provides less traction in cross-

national comparisons and cannot account for

the variation in policy output of nondemocratic

regimes. To illustrate this point, consider the

broad variation in the social policy legislation

adopted by military regimes. Some of these

regimes have adopted policies that favor ur-

ban labor, whereas others have taken a harsh

and repressive stance against industrial work-

ers. Still other military regimes have introduced

universalistic social insurance. In short, “mili-

tary regimes”—one critical category of prevail-

ing taxonomies of autocratic regimes—is not

particularly helpful in explaining variation in

social policy outcomes.

Turning our attention to the relationship

between autocratic regimes and their popula-

tions has signiﬁcant predictive power regarding

the design of, and spending on, social welfare

policies. In doing so, we build on recent work

that has sought to better specify the political

economy of autocracy, noting the dilemma au-

thoritarian rulers face in remaining in power

over a population whose support can never be

completely trusted (Wintrobe 1998). In partic-

ular, the group that maintains the autocrat in

power, which can also credibly mount a chal-

lenge to her rule, has become central to “selec-

torate” theories of political survival (Bueno de

Mesquita 2003). Organizations strong enough

to put an autocrat in power must also possess

the resources to end her rule. Three distinct

political equilibria exist as solutions to the “au-

tocrat’s dilemma,” the challenge of preserving

her rule in the face of her launching organiza-

tion (Haber 2007).

In a ﬁrst scenario, the leader attempts to

eradicate the power of the launching organi-

zation through a strategy premised on terror,

torture, and purges. If the dictator succeeds,

the outcome is one of unconstrained power

and discretion. Under these conditions, how-

ever, the dictator will be unable to commit her-

self not to expropriate predatorily all returns

from economic activity. The consequence is a

lack of investment in these regimes, which will

depress economic activities and tax revenues.

The implications for social policy are relatively

straightforward: One should see little or no so-

cial policy legislation enacted by these regimes.

Much like the classic “stationary bandit” with

a short time horizon, they extract rents to the

maximum extent possible and target spending

on their repressive apparatus (Olson 1993).

The second potential strategy pursued by

authoritarian leaders in their conﬂict with com-

peting organizations is one of collusion. In this

equilibrium, the dictator seeks to prevent coups

by providing leaders of the launching organi-

zation with a stream of rents in selected eco-

nomic sectors, and by simultaneously restrict-

ing the level of economic competition in the

nation. Measures such as barriers to entry, the

98 Mares

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selective allocation of import permits, and the

requirement of licenses or concessions to enter

particular economic activities confer an ongo-

ing privileged status on members of the launch-

ing organization (Haber 2007). To be effective,

the dictator must also bind her own hands and

those of her rivals and private economic agents,

limiting them to a pattern of distribution of

rents that increases the costs of their defec-

tion from this arrangement. In other words, the

dictator sets up institutions that alleviate rivals’

fear of arbitrary expropriation and also guaran-

tee them a steady stream of rents (Haber et al.

2003).

The strategy of collusion has distinct impli-

cations for the design of social policies. Con-

sistent with a set of economic policies premised

on the creation of monopolies, we expect to see

the establishment of “restrictive” social policies,

characterized by narrow coverage and generous

beneﬁts. Thus, the beneﬁciaries of social policy

largesse will be workers in the state-owned or

private-sector industries on which the regime is

also conferring trade protection and other priv-

ileges. High levels of beneﬁts ensure the loy-

alty of these workers to their leaders and their

employers, reducing strikes and other labor ac-

tivism and encouraging wage moderation. Fi-

nancing for these generous programs is made

possible by the monopoly rents these industries

enjoy.

An example of this sort of collusive social

policy occurred under the “immigrant regime”

of the Nationalist government in Taiwan. Po-

litically, this regime relied on the support

of “mainland Chinese” who had immigrated

with Chiang Kai-shek to Taiwan during the

civil war. The institutions and policies put in

place by Chiang Kai-shek contained strong fa-

voritism toward this group and an implicit bias

against native Taiwanese, denying them partic-

ipation in the national power structure (Tsai &

Chang 1985), through a strategy often referred

to as “internal colonization” (Hechter 1975,

Grabowski 1988). Thus, even though the main-

land Chinese constituted a minority in number,

they enjoyed disproportionate power and were

able to set up the political and economic insti-

tutions to beneﬁt their friends and buy off their

potential adversaries.

The Nationalists’ social policy legislation

was introduced by presidential decree—rather

than an act of the legislature—on March 1,

1950, the day of Chiang Kai-shek’s politi-

cal inauguration. The centerpiece of the leg-

islation was the Labor Insurance Act. Cov-

erage was limited to employees of central

and local government-owned enterprises and

blue-collar workers in private enterprises with

more than ten employees. In the same year,

the government introduced soldiers’ insurance.

In short, the government instituted a system

that beneﬁted its most likely challengers—

fellow Nationalists (the launching organiza-

tion), workers with the potential to organize

(and the holders of private capital for whom

they worked), and the military.

A third distinct political equilibrium found

in authoritarian governments is characterized

by organizational proliferation. In this case, the

dictator encourages the creation of competing

organizations in order to raise the costs of col-

lective action by the launching organization.

We seethislogic at work in a variety of cases that

have been categorized as distinct regime types

by previous studies: military governments that

encourage the creation of political parties or

one-party Communist regimes that foster po-

litical competition among rival organizations,

such as the secret police and the military. Haber

invokes Mexico under the PRI as the paradig-

matic case of this political strategy. As Haber

(2007, p. 703) argues, “the key to the PRI’s suc-

cess was that it sat at the center of a network of

organizations which were designed to align the

incentives of a wide variety of organized cor-

porate groups, making it extremely difﬁcult for

any of them to mount a credible challenge to

the party’s monopoly on power.”

In sharp contrast to the collusive autocracies

or to dictatorships that pursue strategies of po-

litical terror, regimes premised on this logic of

organizational multiplication confer economic

rights to broader segments of the population.

Although their resulting property rights sys-

tem is more extensive, it is also more uneven,

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as groups that have been granted some pri-

vate property rights can easily usurp the rights

of unprotected individuals. These regimes of-

ten produce a chaotic mix of economic policies

granting selective beneﬁts to a variety ofgroups.

In the past century, authoritarian governments

that employed organizational proliferation fre-

quently pursued economic strategies involving

import substitution, targeting tariff policies and

government spending to beneﬁt key groups of

local producers and workers, and thus buying

their political support and diffusing potential

tensions.

This characterization of the logic of orga-

nizational proliferation pursued by the PRI in

Mexico resonates with the characteristic poli-

cies pursued by “state corporatist” regimes

(Schmitter 1979). In this strategy, the state

organizes society into constituent units that

are “limited in number” by government re-

striction, “singular” because competitors have

been eradicated, “compulsory” through legal

or other institutional constraints, “noncompet-

itive” owing to state intervention, “hierarchi-

cally ordered” under state management, “func-

tionally differentiated” through organizations

such as industrial unions, recognized by the

state, with a “representational monopoly” on

members of their group, and with state “con-

trols on leadership selection and interest ar-

ticulation” (Schmitter 1979, pp. 20–21). The

organizational proliferation model seeks to co-

opt existing competitors by incorporating them

into the system of beneﬁts as under collusive au-

thoritarianism, but it also seeks to cultivate new

organizations. These new organizations dilute

the power of elites from the launching orga-

nization, and they create overlapping responsi-

bilities and restraints on defection. Indeed, the

total pool of beneﬁciaries grows substantially

such that even if beneﬁts are uneven, mounting

a credible threat against the government may

be difﬁcult. Rents in various forms reach more

members of the population.

The social policy proﬁle of autocracies pur-

suing a political strategy premised on organi-

zational proliferation will differ dramatically

from the social policy proﬁle of other autocra-

cies. One expects these autocracies to enact so-

cial policies with two (seemingly contradictory)

policy characteristics. On the one hand, the so-

cial policies will be characterized by high levels

of institutional fragmentation. This is associ-

ated with pronounced inequities in the level of

social policies. They will, most likely, resemble

the “conservative welfare regimes” of advanced

industrialized democracies, where we ﬁnd pol-

icy privileges granted to civil servants and a

large number of occupational groups (Esping-

Andersen 1990). On the other hand, the level

of social policy coverage found in these regimes

will be much broader than the coverage under

collusive autocracies.

The political development of social pro-

tection in many Latin American countries

provides ample examples of this logic. Under

the military junta that came to power in 1943

in Argentina, efforts were made to develop

new ties to labor through a number of state-

administered social policy measures, including

pensions, public health and social assistance,

housing ﬁnance, and unemployment insurance

(Godio 2000). Yet the mix of beneﬁts varied

greatly. Wages were signiﬁcantly lower for

government workers and health and education

workers, but these sectors were compensated

through even stronger job protections (Carnes

2008). Equally importantly, the 1945 Law of

Professional Associations assured labor union

bargaining rights and recognized monopoly

unions in each industrial sector; however, this

measure also limited the independence of labor

and restricted its right to strike (Collier &

Collier 2002). In Brazil, too, the harder-line

military regime that emerged in 1964 ﬁrst

sought the most radical kind of organizational

proliferation—establishing an “ofﬁcial” oppo-

sition party—the Democratic Movement of

Brazil (MDB). When this proved impossible to

manage, the government sought to fragment it

into smaller parties. On the social policy front,

it extended social security entitlements to rural

workers in 1971, and in 1974 gave pensions

to older urban workers who had not made

full payments into the social security system.

Both were clear efforts to win the allegiance

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of alternative political bases. However, the

beneﬁts to these rural and informal workers

lagged far behind those enjoyed by industrial

and civil service workers (Haggard & Kaufman

2008). Our third example of organizational

proliferation comes from Mexico (Haber

2007). Seeking to consolidate control over a

nation wracked by the regional and economic

rivalries of the 1910–1920 Mexican Revolu-

tion, Plutarco El

ıas Calles and his successors

designed their new party to gather the disparate

strands of the population—with sections for

the military, peasants, industrial workers, and

“popular” middle classes (Skidmore & Smith

2005). Although the Instituto Mexicano de

Seguro Social (IMSS) was not created until the

1940s and was restricted to a small number of

beneﬁciaries, it would be gradually expanded

to larger segments of the urban working class.

Beneﬁts were not even, though, as state work-

ers received the far more generous assistance

of their own social security agency (ISSSTE).

The conditions under which authoritarian

governments choose a strategy based on orga-

nizational co-optation versus proliferation re-

main uncertain. It would seem that the number

of critical supporters that make up the launch-

ing organization—roughly analogous to the

“selectorate” in the terminology of Bueno de

Mesquita et al.—is central to the choice of strat-

egy. Where membership in the launching or-

ganization is more restricted, and where other

potential challengers are limited in number, it

is easier to set up institutions to favor the focal

elites. Conversely, when the autocrat is brought

to power by a broad coalition of interests, or in a

civil conﬂict with many disparate parties and in-

terests, then organizational proliferation will be

preferred. This allows the autocrat to cultivate

ties to each of the potential challengers, frag-

menting them and frustrating their efforts to

collectively bring down the regime. Finally, the

initial political ties and the ideological goals of

the launching organization constrain the policy

choices of the dictator, leading to policies with

distinct distributional biases.

Given the large number of cases in which so-

cial policy adoption occurred under autocracy,

and the scant attention it has received in the ex-

isting literature, we contend that future studies

must deepen our theoretical understanding of

the political (especially authoritarian) dynamics

driving social policy development. We have of-

fered a preliminary outline of such an approach,

but in-depth case studies are needed to test its

logic.

VARIETIES OF DEVELOPMENTAL

CAPITALISM AND VARIETIES OF

WELFARE REGIMES

The explanation outlined above attributes di-

vergence in social policy outcomes to differ-

ent levels of political competition within auto-

cratic regimes. However, a number of scholars

argue either that regime type is epiphenome-

nal or that its causal effect is strongly medi-

ated by other variables (Haggard & Kaufman

2008). In this related line of research, a number

of studies are seeking to relate cross-national

differences in social insurance programs to dif-

ferences in the economic strategies pursued by

various countries (Wibbels & Ahlquist 2007,

Haggard & Kaufman 2008). This promising

line of research is characterized by an intense

search for the “ﬁrst-order” causal variables that

explain the initial adoption of a developmental

model of capitalism.

The theoretical antecedent of these studies

is the scholarship stressing the causal linkages

between “production regimes” and “welfare

regimes” in advanced industrialized economies

(Kitschelt et al. 1999, Hall & Soskice 2001,

Ebbinghaus & Manow 2001). These studies

have identiﬁed systematic cross-national diver-

gence in the organization of ﬁnancial and in-

dustrial relations systems among advanced in-

dustrialized countries, distinguishing between

coordinated and liberal market economies. In

coordinated market economies, a dense net-

work of business organizations as well as the

provision of patient capital by ﬁrms facilitates

high levels of investment in ﬁrm- or industry-

speciﬁc skills. The presence of these institutions

of nonmarket coordination affects the social

policy preferences of employers and workers in

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Social Policy in Developing Countries 101

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ANRV377-PL12-06 ARI 13 April 2009 12:43

these economies and the formation of cross-

class alliances in support of social policies that

protect investment in skills (Estevez Abe et al.

2001; Mares 2001, 2003). These include insur-

ance policies with earnings-related beneﬁts that

raise the reservation wage of high-skilled work-

ers and lower their willingness to take up jobs

that do not correspond to their qualiﬁcations.

By contrast, in liberal market economies, ﬁrms’

incentives to undertake long-term investments

in the skills of their workers are lower because

of weak employers’ associations and ﬂuid capi-

tal markets. In this context, cross-class alliances

among employers and employees are less likely

to form, and business is more likely to press for

the deregulation of labor markets and for re-

ductions in social policy beneﬁts (Wood 2001).

More recently, attention has turned to the

ways that nations use social policies to shape or

create a labor force adequate to their “particu-

lar development projects” (Wibbels & Ahlquist

2007). According to this logic, the choice of so-

cial policies is not driven by partisan politics or

by the level of democracy or even by regime

type, but by four structural conditions: domes-

tic market size, relative abundance or scarcity of

labor, asset inequality, and the openness of the

international economy. The resulting policies

tend to cluster on three main “regimes” that

emphasize redistributive social security insur-

ance, human capital development, or a mix of

the two.

In countries marked by large domestic

markets, scarce labor, and high inequality,

inward-oriented “import-substitution industri-

alization” (ISI) development strategies predom-

inated as a response to the Great Depression.

Capitalists sought to create a labor force capa-

ble of domestic industrial production, as well as

a consumer base capable of absorbing their out-

put. To do so, they needed to invest in skill de-

velopment among workers, and they looked to

social policy as a way to retain workers by insur-

ing them against the risks of injury or sickness.

Urban industrial workers came to possess a high

level of bargaining power in these labor-scarce

economies and were able to effectively organize

to lobby for “insurance-based social regimes”

(Wibbels & Ahlquist 2007). Capitalists were

supportive of this redistribution through social

security programs because it ensured continued

demand for their domestically produced goods.

In contrast, in large, labor-abundant, and

low-inequality economies, ISI policies were

staved off through the efforts of relatively

stronger rural sectors who would not tolerate

the urban bias of ISI. In these cases, “export-led

industrialization” (ELI) was chosen. Capitalists

required two features in the labor market—a

skilled workforce and low labor costs—in or-

der to remain internationally competitive. They

favored a “human capital” social policy regime

emphasizing education and health care and with

little or no redistributive social policy (Wibbels

& Ahlquist 2007). In these cases, workers have

not felt the need to call for more redistribu-

tion, and collective action has been complicated

by the relatively large and homogenous labor

force.

Finally, a “mixed” social spending regime

combines “modest levels of insurance and hu-

man capital spending” (Wibbels & Ahlquist

2007). These regimes have occurred in coun-

tries with large domestic markets and abun-

dant labor, but in which ISI developed ow-

ing to high levels of inequality. Nevertheless,

the abundance of labor made it impossible for

workers to collectively demand high insurance

spending, leading to only moderate redistribu-

tion and the adoption of some human capital

spending. Similar mixed outcomes may also oc-

cur in smaller countries with mineral wealth.

This elegant and parsimonious theory

presents a novel explanation of the determi-

nants of social spending in developing coun-

tries. Several aspects of this theory, however,

require further analysis. A critical assumption

is that all leaders facing similar structural con-

ditions will happen upon similar development

strategies with similar implications for social

policy spending. However, we have suggested

above that authoritarian regimes may have po-

litical motives, unrelated to structural economic

conditions, that determine their patterns of so-

cial spending. A political answer based on the

electoral needs of the government in power

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ANRV377-PL12-06 ARI 13 April 2009 12:43

underwriting the ISI policies with subsidies and

trade protections needs to be developed.

In addition, the causal connection between

some of the underlying structural variables and

a developmental regime is often unclear in this

theory. On the one hand, many of the struc-

tural factors that are taken as given and exoge-

nous might be in fact endogenous to the politi-

cal process and social policy regime adopted. In

particular, levels of inequality and labor mar-

ket stratiﬁcation would seem to be both causes

and consequences of the educational system

and of social policy more generally. In addi-

tion, many countries show signiﬁcant variation

over time in their levels of labor scarcity. Fi-

nally, several countries experienced signiﬁcant

changes in their developmental model. Korea

shifted from an ISI model to ELI in the mid-

1950s (Chibber 2003). Many Latin American

countries pursued the ISI strategies for only

brief periods of time. Models relying on time-

invariant structural variables cannot account for

this contingency in the choice of developmental

models.

The preferences and incentives of politi-

cal actors over different policy choices also

are inadequately speciﬁed. Consider the choice

whether or not to invest in educational poli-

cies. It is unclear why both workers and em-

ployers under ISI do not prefer spending on

education, recognizing the advantages of such

a choice in the long term. Why do workers not

call for more broad-based educational efforts?

Why would employers prefer to bear the cost

of educating workers in basic skills when they

could outsource education to the government?

Further, recognizing the gains that could be

made if efﬁciency were achieved and markets

opened, why would capitalists “vote” against

universalistic education that would make work-

ers interchangeable and lower the wage rate?

A political answer, based on the concentration

of rents for industrial workers and the electoral

needs of the government in power underwriting

the ISI policies with subsidies and trade protec-

tions, needs to be developed.

A ﬁnal difﬁculty with this approach is that

it emphasizes policy continuity and tends to

downplay the variation in social spending that

occurred over time, especially in the most re-

cent decades. The examples of South Korea,

Tunisia, and Mexico, which are cited as pre-

senting stable social security spending, actually

show increases of 100% or more (and decreases

of 50% or more) in particular policy areas in

the period of 1970–1982. Thus, although de-

scribing spending regimes is helpful, this anal-

ysis may miss some of the most important and

politically contentious modiﬁcations that have

happened over time.

An alternative structural approach empha-

sizes the importance of “critical alignments”

that occurred in the mid-twentieth century in

different regions of the world, and contends

that distinct logics are needed to explain the dif-

ferent processes of social policy adoption and

reform in developing countries (Haggard &

Kaufman 2008).

Analyzing spending levels in each of the

three principal social policy areas—pensions,

health, and education—the critical-alignments

approach proposes three regional social welfare

types for Latin America, Asia, and Eastern

Europe (Haggard & Kaufman 2008). Com-

paring social programs in 1980, Haggard &

Kaufman describe how “social security spend-

ing in Latin America dwarfs that of East Asia’s

minimalist welfare states,” whereas Eastern

European nations consistently outspend (often

by a factor of two) the Latin American states. In

health care, Latin America tends to emphasize

curative health care while Asia spends propor-

tionally more on basic health care. In education,

although spending levels are not radically dif-

ferent between the two regions, Latin America

devoted more spending to secondary educa-

tion, and Asia showed superior performance in

student retention through ﬁfth grade.

Critical realignments are argued to have

provided the genesis of the distinct social wel-

fare policy regimes in the mid-twentieth cen-

tury in each region, through which the chang-

ing composition of the ruling elite led to new

“incentives to co-opt, control or repress urban

labor unions and political movements repre-

senting the working class and the peasantry”

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Social Policy in Developing Countries 103

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ANRV377-PL12-06 ARI 13 April 2009 12:43

(Haggard & Kaufman 2008, p. 20). At this time,

the Cold War produced very different results

in Eastern Europe, where Communist dictator-

ships took control and made workers central to

their political strategy, and Asia, where viru-

lently anti-Communist leaders severely limited

the emergence of left parties and weakened la-

bor. In Latin America, reformist leaders came

from the military and middle classes and sought

to win electoral support from the urban work-

ing class by extending employment-related so-

cial insurance. Each of these ruling coalitions

played a crucial role in setting up each nation’s

development strategy—whether ISI or export-

led growth—which reinforced and supported

the coalitions. Where large urban labor forces

were co-opted or integrated into the state in

Latin America and Eastern Europe, ISI policies

were chosen, further cementing the industrial

workforce’s privileged place in the economy. In

Asia, as many of the nations emerged from colo-

nial rule in the postwar period, Cold War con-

cerns and U.S. support encouraged export-led

development strategies.

A separate logic is proposed to explain

the reform process of social welfare policy in

the three regions during the post-1980 “third

wave” of democracy. Here the causal impor-

tance of two main independent variables is

stressed. First, economic conditions in the

1980s set up a path of either expansion or con-

traction. Where economic growth and struc-

tural conditions were positive (East Asia), social

policy programs tended to expand in size and

coverage. Where these conditions were nega-

tive (Latin America and Eastern Europe), the

return to democracy was marked by a contrac-

tion of social policy commitments. Second, the

reforms of the 1980s and 1990s are argued to

build on the earlier political legacy that so-

cial policy had created in each region. Thus, in

East Asia, where social policy had been limited,

the expansion of coverage was politically pop-

ular, drawing in new supporters to democratic

governments increasingly interested in cultivat-

ing an electoral base. Conversely, in Eastern

Europe, where social policy commitments were

broad, efforts at reduction met widespread op-

position. Similarly, in Latin America, unions

that had been privileged under earlier poli-

cies opposed both expansion of coverage (which

would dilute their beneﬁts) and retrenchment

in the programs that targeted them.

Although this complex structural analysis is

a signiﬁcant advance over much of the existing

literature, the causal explanation it ultimately

presents is nearly as complex as the reality it

describes. The line between theory and history

is blurred to the point where it is unclear which

variables are more important than others.

Further, the emphasis on regional clusters

may obscure more than it reveals. On the one

hand, the “cross-regional” differences are not

as stark as they are portrayed. Consider the

differences in the relative emphasis on educa-

tional spending, which, according to this expla-

nation, differs dramatically between East Asia

and Latin America. There is no difference in

the average spending on education as a percent-

age of GDP between Latin America and East

Asia—both are 3.2%—and the difference in av-

erage education spending as a percentage of to-

tal government spending is only 2.3% (17.5%

of total spending in Asia versus 15.2% in Latin

America). Neither difference is statistically sig-

niﬁcant ( p-values of 0.6 and 0.55, respectively).

Indeed, very few of the regional differences in

welfare state spending are statistically signiﬁ-

cant. Morever, the “regional dummies” invoked

by this analysis conceal too much within-region

variation. This within-region difference is per-

haps starker in East Asia than in Latin America

(Ramesh 2005). Explanations for cross-national

variation within regional clusters at these crit-

ical moments invoke a long list of potential

explanatory variables, which includes regime

type, strength of the labor movement, eco-

nomic structure, strength of populist parties,

and so on. The analysis does not specify their

relative importance nor the levels and critical

values at which changes in these variables ac-

count for cross-national variation within a re-

gional cluster.

A ﬁnal shortcoming of the structural

“production regime” approach, shared with

their theoretical counterpart in the literature

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focusing on advanced industrialized societies,

is their assumption of strong policy coherence

within countries. In the following section, we

show that evolution of social policies in recent

decades is characterized by tremendous varia-

tion across policy areas even within the same

country.

THE POLITICS OF SOCIAL

POLICY REFORMS

During recent decades, social policies through-

out the world have undergone signiﬁcant

modiﬁcation. Change and transformation

are common to both developed and devel-

oping countries. However, the magnitude of

change experienced by advanced industrialized

economies is dwarfed by the thorough-going

policy changes that occurred in Latin America,

Asia, and Eastern Europe in the 1990s.

Two kinds of policy changes have received

signiﬁcant attention. The ﬁrst is the wave of

pension privatization that has swept the world.

By 2005, 24 countries had adopted a private pil-

lar. The speed of privatization and the magni-

tude of policy change have varied dramatically

across countries. Some countries, such as Chile

and Mexico, have entirely abolished the pre-

existing public pillar. Others, such as Uruguay,

have adopted a mixed system, where workers’

pensions are ﬁnanced by a combination of the

public and private systems. Still other coun-

tries have enacted a parallel privatization, giv-

ing their citizens a choice between the public

and the private pillar. In explaining the adop-

tion of these policies, some studies have empha-

sized the impact of the competitive and ﬁscal

pressures of globalization—most notably that

of capital market liberalization (Madrid 2003,

Brooks 2008). Other studies have focused on

policy diffusion through the imitation of for-

eign models, noting how cognitive biases and

heuristic shortcuts lead policy makers to fol-

low the example set by their neighbors’ reform

(Weyland 2005, 2007).

The second set of changes that has received

attention in the literature is the expansion of

social protection in East Asian economies. The

most dramatic examples are the introduction of

universalistic health insurance by Taiwan and

Korea in 1994 and 1997, respectively (Wong

2003). Explanations of these changes focus on

two consequences of democratization. First,

the incentives of politicians changed follow-

ing transitions to democracy (Wong 2004). In

the new context of heightened electoral com-

petition, these studies argue, politicians have

appealed to voters by offering social policy

promises, but they failedto internalize the long-

term ﬁscal implications of programmatic ex-

pansion. Because politicians from all political

parties have found this strategy attractive, par-

tisan differences carry little explanatory weight

in accounting for variation in outcomes. An-

other consequence of democratization was the

mobilization of new social groups, such as non-

governmental organizations (NGOs), which

heightened political awareness of the strong in-

equities in policy coverage and swayed political

opinion in favor of the introduction of univer-

salistic programs (H.J. Kwon 2002, S. Kwon

2002).

Current research investigating these

changes—the privatization of pensions and the

introduction of universalistic social policies—

has generated insights that complement or

challenge the ﬁndings regarding the politics of

social policy reforms in advanced industrialized

economies. One important set of theoretical

implications concerns the role of partisanship

in affecting the direction of social policy

reforms. The introduction of universalistic

social policies in Korea and Taiwan challenges

the proposition advanced by power-resource

scholars that strong and encompassing trade

unions and social democratic parties are a

necessary institutional precondition of uni-

versalism (Esping-Andersen & Korpi 1984).

Studies of pension privatization in Latin

America also reveal that left-wing parties are

not less likely than right-wing parties to adopt

pension privatization, although some studies

ﬁnd a small partisan effect on the magnitude

of the reforms (Brooks 2008). Reformulating

the “Nixon goes to China hypothesis,” other

scholars have suggested that left-wing parties

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are more likely to adopt radical reforms,

owing to their superior ability to communi-

cate to their constituents the advantages of

these reforms and the absence of alternatives

(Cukierman & Tommasi 1998, Tommasi 2002).

Nevertheless, the importance of partisanship

as an explanatory variable continues to remain

contested. In recent research, Huber and

others argue that—conditional on the age

of democracies—the political strength of

left-wing parties contributes to differences in

patterns of spending across Latin America,

leading to lower levels of inequality (Huber

et al. 2006).

Recent social policy reforms in developing

countries also present challenges to explana-

tions that have stressed the constraining effects

of previous policies and institutions (Pierson

1994, 2001). Scholars of policy reforms in ad-

vanced industrialized societies have emphasized

that existing policies “exhibit increasing returns

and self-reinforcement: each step along a path

produces consequences which make that path

more attractive in the next round and raises the

cost of shifting to an alternative path” (Myles

& Pierson 2001, p. 312). An important impli-

cation of this argument is that the “stickiness”

of existing policies is higher for larger pro-

grams and for programs with a longer politi-

cal history. As Pierson argues, a policy of long

duration and large scope will have a large polit-

ical constituency supporting it, which will con-

strain efforts of politicians to change the status

quo. The wave of pension privatization that has

swept the world casts some doubt on the ex-

planatory power of this theory. The prediction

Targeting

Universalism

Redistribution

Low High

Privatization

Contributory insurance

Low

High

Socialization of risks

Figure 1

Socialization of risks.

that larger programs are stickier is not borne out

by the data: Pension programs, the largest social

policy program in most developing countries,

have been the most vulnerable to retrench-

ment. These developments point to the need to

identify the conditions under which dramatic,

“path-departing” policy change is possible even

in the presence of programs with large polit-

ical constituencies (Ebbinghaus 2005, Brooks

2008).

The emphasis on these two broad changes—

the privatization of pensions and the intro-

duction of universalistic health insurance—has

obscured other important transformations in

social policies that have taken place in many de-

veloping countries. Figure 1 maps examples of

policy changes in developing countries in a two-

dimensional policy space. The horizontal axis

captures variation in the “socialization of risks”

across different social policies. Policies taking

low values along this axis are characterized by

low levels of risk pooling. These are private-

type policies where the level of beneﬁts is linked

either to the actuarial risk facing the individual

or to the returns made by investments in per-

sonal, private accounts. The common feature of

both policies is the individualization of risk, or

in Baldwin’s deﬁnition, the “fact that individuals

face risk alone and not as part of a broader com-

munity of risks” (Baldwin 1990, p. 3). Policies

taking high values on this axis are characterized

by a high diffusion of risks across covered oc-

cupational groups. The vertical axis measures

the redistribution undertaken by the particular

social policy, in other words, the “propoor bias”

of the particular policy. Policies taking high val-

ues along this axis involve higher redistribution

from high-income to low-income groups. By

contrast, in policies taking low values along this

axis, little or no redistribution from the rich to

the poor is attempted.

Existing research has predominantly fo-

cused on two cells of the policy space. Private

old-age insurance policies occupy the lower

left-hand corner of the policy space. Although

these policies shift a signiﬁcant part of the risk

to individuals, the beneﬁt structure also favors

higher-income earners. The other policies that

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ANRV377-PL12-06 ARI 13 April 2009 12:43

have been studied are situated in the upper

right-hand corner of the policy space. Univer-

salistic social policies in Asia are characterized

not only by high levels of coverage but also

by high levels of redistribution across income

groups. According to estimates of the Korean

Health Ministry, the ratio between health ben-

eﬁts and contributions for individuals in the

lower 10% of the income distribution was 6.45.

By contrast, it was 0.27 for the highest 10% of

the population (Chun 2006). Studies of the dis-

tributional implications of the Taiwanese health

care sector reveal a similar pattern (Cheng

2004, 2005).

But, as Figure 1 illustrates, the other two

cells of this policy space are not empty in the

way that the literature might suggest. The vast

majority of health care reforms introduced by

Latin American countries occupy the upper

left-hand corner of this policy space. Many of

these countries have introduced reforms that

attempt to increase the access of low-income

groups to health services (Mesa-Lago 2007).

Although means-testing limits the scope of

beneﬁciaries of these policies (resulting in

low values on the coverage dimension), these

policies take high values on the redistributive

dimension of the social policy space. Consider

the following examples. Beginning in the

mid-1990s, the Brazilian health ministry in-

troduced policies that guarantee basic services

for lower-income groups (Weyland 2005, p.

231). In 1993, El Salvador introduced similar

policies subsidizing health beneﬁts for the

poor. Peru introduced the Programa de Salud

Basica para Todos in 1994, which increased

basic health care in rural areas. A related policy,

the Programa de Fortalecimiento de Servicios

de Salud provided subsidies for the poor. In

Colombia, the introduction of health insurance

subsidies for poorer sectors led to an increase

in the access to health beneﬁts of the poor

from 4% in 1993 to 40% in 1997 (Weyland

2005). In Mexico, President Zedillo introduced

Progresa, a program providing health subsidies

to low-income groups, in 1995 (Gertler 2007).

Contributory social insurance policies, lo-

cated in the lower right-hand quadrant of the

social policy space in Figure 1, are also distinct

from the other social policy alternatives dis-

cussed above. In these policies, insurance con-

tributions are not tied to the incidence of risk

faced by the individual. As a result, risk is so-

cialized, and the redistribution of risks is higher

than in private social policies. The structure

of beneﬁts is regressive, preserving (and some-

times amplifying) market-based inequalities of

income. Korean pension reforms are an exam-

ple of a policy situated in this quadrant of the

policy space (Moon 2001).

The literature’s exclusive exploration of

quadrants 2 and 4 of the policy space has had

important consequences. Signiﬁcant variation

in the design and distributive implications of

social policies has not been adequately ex-

plored. While many countries in Latin America

have privatized their old-age insurance policies,

they have also introduced health care policies

that explicitly provide beneﬁts to the poor.

Studies of social policy reform in Asia also fail

to account for variation across policy areas. We

see the introduction of universalistic policies in

one subsystem of the welfare state, health care,

whereas the development of old-age insurance

policies has followed a dramatically different

trajectory. While Korea has introduced Bis-

marckian policies, Taiwan has recently priva-

tized its pension system. Existing explanations

focusing on regional dummies or even country-

speciﬁc attributes cannot adequately account

for this variation.

Mares (2007b) proposes a political expla-

nation of these policy outcomes that explores

the sources of variation in individual prefer-

ences over these policy alternatives and the

strategic alliances formed in support of, or op-

position to, various programs. In this model,

wage earners in the formal sector are the piv-

otal political group. These employees can ei-

ther choose to form a political coalition with

lower-income groups (and thus support poli-

cies with a propoor bias) or they can ally with

higher-income groups (supporting programs

with no effort to redistribute income). The

model also seeks to account for conditions un-

der which these coalitions support policies that

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take different values along the dimension mea-

suring the socialization of risks and favor either

“private-type” social policies that involve no re-

distribution of risks across occupations or poli-

cies characterized by broad coverage and a high

interoccupational redistribution of risks.

The preferences for social policies of the piv-

otal group are affected by several underlying

economic characteristics. These include the rel-

ative level of income and the relative risk proﬁle

with respect to the risk insured by the program

(old age, sickness, disability, or unemployment).

The relative salience of risk versus income de-

pends on the overall level of inequality and the

distribution of risks in the economy. All things

equal, if the level of inequality is high, the bene-

ﬁts from risk redistribution for high-risk groups

might be outweighed by their disutility in terms

of lower income. By contrast, if the level of

inequality is low, one expects the distribution

of risks to be a stronger predictor of the dis-

tributional conﬂicts over a new policy. This

analysis thus reconciles two competing theo-

retical claims regarding the politics of redistri-

bution, which have emphasized either income-

based (Melzer-Richard) or risk-based conﬂict,

showing that the relative importance of each

(income and risk) depends on the underlying

distribution of these variables in the economy.

In addition to these variables, an impor-

tant individual-level determinant of social pol-

icy preferences is the economic security of the

pivotal group—in other words, its expectation

of steady, uninterrupted employment. This as-

sumption is the basis of the complex redistribu-

tional mechanisms worked out in contributory

insurance policies. An increase in the economic

insecurity of the pivotal group—due to exoge-

nous changes such as tertiarization, an increase

in labor market ﬂexibility, or informalization—

has important implications for its social pol-

icy preferences. On the one hand, the expected

utility derived from all forms of contributory

insurance declines. On the other hand, their

willingness to support policies with a higher

propoor bias increases because they expect

to rely on residual policies more frequently.

In other words, an increase in the economic

insecurity of wage earners in the formal sec-

tor contributes to the formation of coalitions

between this group and the poor in many de-

veloping countries.

Differences in the extractive capacity of the

state explain variation in the location of the

preferences of pivotal voters along the horizon-

tal axis of the social policy space and the choice

between private-type social policies and poli-

cies involving greater redistribution of risks. In

this model, workers in the pivotal sector choose

among different policies by comparing the costs

of these programs (their post-tax wages) against

the expected future stream of beneﬁts. In the

case of a private program, those beneﬁts are the

result of returns from private funds. Bycontrast,

in the case of a policy administered by the state,

future streams of beneﬁts are a function of the

capacity of the state to enforce social insurance

legislation. If workers in the formal sector assess

that the ability of the state to enforce existing

social insurance legislation is low, they will sup-

port private-type social policies. Weaknesses in

state capacity erode the potential gains these

workers can reap from a broad redistribution

of risks. The importance of this variable differs

across policy areas: Its impact is larger for poli-

cies with a longer lag time between the payment

of the contributions and the receipt of social in-

surance beneﬁts (such as pensions) and smaller

in policies where this lag is shorter. The impli-

cation of this argument is that the ﬁscal capacity

of the state affects the size of the political coali-

tions favoring different levels of redistribution.

Finally, rules pertaining to the design of dif-

ferent programs also affect the strategies pur-

sued by the pivotal sector and, hence, the com-

position of the political coalitions supporting

different policies. Consider the consequences of

the “policy externalities” of different programs

(Roemer 2006). (Policies such as immunization

programs have large externalities—they affect

the health status of all citizens.) An increase in

the magnitude of positive policy externalities

is likely to affect the probability of a coalition

between middle classes and the poor. A sec-

ond relevant feature of policy design is the lag

time between the payment of contributions and

108 Mares

Carnes

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ANRV377-PL12-06 ARI 13 April 2009 12:43

the receipt of social policy beneﬁts. We expect

pivotal groups to discount more strongly the

promised social policy beneﬁts in policies with

a high lag time and favor more limited social-

ization of risks and income redistribution.

To summarize the above discussion, the

four outcomes identiﬁed in the policy space

in Figure 1 are distinct political equilib-

ria supported by different political coalitions.

Figure 2 presents these coalitions, showing

how their interaction with the level of state ca-

pacity produces each of the distinct outcomes.

They are “self-sustaining” in the sense that ac-

tors supporting them have no incentives to de-

fect. Contributory insurance policies (quadrant

1) are supported by a coalitionof middle and up-

per classes in conditions of high state extractive

capacity. These Bismarckian policies—once the

modal social policy adopted by developed and

developing countries alike—are rare in recent

decades. Changes in economic conditions, such

as the decline in the importance of full-time

employment, make these policies less attractive

to urban workers than alternatives where ac-

cess to beneﬁts is not contingent on an unin-

terrupted stream of contributions. In contrast

to contributory insurance programs, universal-

istic policies (quadrant 4) rely on a coalition of

the middle classes and the poor in economies

with high extractive capacity. In these environ-

ments, middle-class workers are likely to accept

a policy outcome that redistributes to the poor

if their economic prospects are secure and if the

poor have a better risk proﬁle, which thus cre-

ates gains from redistribution of risks (Mares

2003). In countries with weak extractive capac-

ity, we ﬁnd either coalitions between the middle

class and the poor in support of means-tested

programs (quadrant 3) or coalitions between

the middle class and the rich in favor of pri-

vate social policies (quadrant 2). The difference

between these two outcomes can be attributed

to differences in either (a) the risk proﬁle or

economic insecurity of the pivotal group or

(b) policy feedbacks, such as lag times or pol-

icy externalities, between programs.

By modeling individual preferences for dif-

ferent policies and the conditions leading to

Targeting

M+L

Universalism

M+

Policy feedbacks

Distribution of risks and income

Low High

Privatization

M+U

Contributory Insurance

M+

High

Low

Extractive capacity of the state

Figure 2

Extractive capacity of the state.

the formation of different political coalitions,

the theory sketched here provides more explicit

micro-foundations for macro-level outcomes.

As such, it complements earlier studies exam-

ining social policy reforms in developing coun-

tries, which have focused primarily on the po-

litical incentives or ideational beliefs of elites. It

also highlights the effect of seemingly small dif-

ferences in institutional design on the political

incentives of actors. The observation that “pol-

icy feedbacks” have different consequences for

policy outcomes was initially developed by his-

torical institutionalist scholars (Skocpol 1992,

Pierson 1994). This research shows that policy

feedbacks have lasting political consequences.

On the one hand, they create incentives for

pivotal groups to defect from the policy sta-

tus quo. On the other hand, they generate self-

enforcing political equilibria around new poli-

cies and contribute to the formation of different

political alliances. This suggests that the study

of the recent dynamics of social policy reform

in developing countries is an area of research

where insights of historical and rational choice

institutionalism can be fruitfully integrated.

CONCLUSION

We have written elsewhere of the need for

“research on social policy to become more

unequivocally comparative in its orientation”

(Carnes & Mares 2007, p. 882), and here we

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•

Social Policy in Developing Countries 109

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ANRV377-PL12-06 ARI 13 April 2009 12:43

have pointed out some of the insights gained

from studying the social insurance programs

of developing countries. This has allowed us

to observe greater variation in social policy

outcomes—both across countries and regions,

and across policy areas within individual coun-

try cases—as well as a wider range of values on

the independent variables that are most studied

in the literature.

In this article, we have explored three

ongoing areas of research on the social policies

of developing countries. The ﬁrst concerns

the political origin of social programs. In

many developing countries, social policies

have originated under authoritarian regimes.

The large variation in the scope of these

programs and the level of beneﬁts is, so far,

unaccounted for by existing studies. We have

proposed a political explanation for these

policies that is based on the strategies pursued

by authoritarian leaders in their struggle with

the political organizations that brought them

to power. A second exciting area of research

explores the linkages between developmental

strategies pursued by various countries and

their social policy regimes. In examining this

recent literature, we have argued that a better

speciﬁcation of the social policy preferences of

relevant political actors is needed to provide

a stronger micro-foundation for the observed

macro-level regularities. A third direction is

the study of recent developments in social

policies. We have demonstrated the existence

of signiﬁcant variation across policy areas in

the trajectories and distributional implications

of social policies in many developing countries,

and we have proposed an explanation for these

outcomes that identiﬁes the different political

coalitions supporting these policies. Their size

and their political composition are, in turn,

affected by broader institutional factors and by

the underlying distribution of income and risk.

The study of social policy in develop-

ing countries presents one of the most excit-

ing research agendas in comparative political

economy. Better data and more sophisticated

research methods now allow us to untangle as-

pects of policy design and distributional con-

sequences that could not have been detected

earlier. Yet many very basic questions are still

in need of systematic analysis and explanation.

This growing line of study promises not only

to give insights regarding a new class of cases—

developing countries—but also to enrich our

understanding of important aspects of social

policy around the world. In the current world

context, the ability to adapt economically is

crucial. Policies of risk reduction and allevia-

tion have never been more central to political

life.

DISCLOSURE STATEMENT

The authors are not aware of any afﬁliations, memberships, funding, or ﬁnancial holdings that

might be perceived as affecting the objectivity of this review.

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Annual Review of

Political Science

Volume 12, 2009

Contents

A Conversation with Robert A. Dahl

Robert A. Dahl and Margaret Levi ppppppppppppppppppppppppppppppppppppppppppppppppppppppppppp1

Neorepublicanism: A Normative and Institutional Research Program

Frank Lovett and Philip Pettit ppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppp11

Domestic Terrorism: The Hidden Side of Political Violence

Ignacio Sánchez-Cuenca and Luis de la Calle pppppppppppppppppppppppppppppppppppppppppppppppp31

Women in Parliaments: Descriptive and Substantive Representation

Lena Wängnerud pppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppp51

Self-Government in Our Times

Adam Przeworski pppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppp71

Social Policy in Developing Countries

Isabela Mares and Matthew E. Carnes ppppppppppppppppppppppppppppppppppppppppppppppppppppppp93

Variation in Institutional Strength

Steven Levitsky and María Victoria Murillo pppppppppppppppppppppppppppppppppppppppppppppp115

Quality of Government: What You Get

Sören Holmberg, Bo Rothstein, and Naghmeh Nasiritousi pppppppppppppppppppppppppppppppp135

Democratization and Economic Globalization

Helen V. Milner and Bumba Mukherjee ppppppppppppppppppppppppppppppppppppppppppppppppppp163

Has the Study of Global Politics Found Religion?

Daniel Philpott pppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppp183

Redistricting: Reading Between the Lines

Raymond La Raja ppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppp203

Does Efﬁciency Shape the Territorial Structure of Government?

Liesbet Hooghe and Gary Marks ppppppppppppppppppppppppppppppppppppppppppppppppppppppppppp225

Bargaining Failures and Civil War

Barbara F. Walter ppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppp243

Hobbesian Hierarchy: The Political Economy of Political

Organization

David A. Lake ppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppp263

Annu. Rev. Polit. Sci. 2009.12:93-113. Downloaded from arjournals.annualreviews.org

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AR377-FM ARI 7 April 2009 11:25

Negative Campaigning

Richard R. Lau and Ivy Brown Rovner pppppppppppppppppppppppppppppppppppppppppppppppppppp285

The Institutional Origins of Inequality in Sub-Saharan Africa

Nicolas van de Walle ppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppp307

Riots

Steven I. Wilkinson pppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppp329

Regimes and the Rule of Law: Judicial Independence in Comparative

Perspective

Gretchen Helmke and Frances Rosenbluth ppppppppppppppppppppppppppppppppppppppppppppppppp345

Field Experiments and the Political Economy of Development

Macartan Humphreys and Jeremy M. Weinstein ppppppppppppppppppppppppppppppppppppppppp367

Laboratory Experiments in Political Economy

Thomas R. Palfrey ppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppp379

Field Experiments on Political Behavior and Collective Action

Eline A. de Rooij, Donald P. Green, and Alan S. Gerber ppppppppppppppppppppppppppppppppp389

Experiments on Racial Priming in Political Campaigns

Vincent L. Hutchings and Ashley E. Jardina pppppppppppppppppppppppppppppppppppppppppppppp397

Elections Under Authoritarianism

Jennifer Gandhi and Ellen Lust-Okar ppppppppppppppppppppppppppppppppppppppppppppppppppppp403

On Assessing the Political Effects of Racial Prejudice

Leonie Huddy and Stanley Feldman pppppppppppppppppppppppppppppppppppppppppppppppppppppppp423

A “Second Coming”? The Return of German Political Theory

Dana Villa ppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppp449

Group Membership, Group Identity, and Group Consciousness:

Measures of Racial Identity in American Politics?

Paula D. McClain, Jessica D. Johnson Carew, Eugene Walton, Jr.,

and Candis S. Watts ppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppp471

Opiates for the Matches: Matching Methods for Causal Inference

Jasjeet Sekhon pppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppppp487

Indexes

Cumulative Index of Contributing Authors, Volumes 8–12 ppppppppppppppppppppppppppppp509

Cumulative Index of Chapter Titles, Volumes 8–12 ppppppppppppppppppppppppppppppppppppp511

Errata

An online log of corrections to Annual Review of Political Science articles may be found

at http://polisci.annualreviews.org/

vi Contents

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