Varieties of Asian welfare capitalisms and the influence of globalization

Abstract

Asian welfare capitalisms as well as advanced economies face the risks associated with globalization. In order to understand how Asian welfare capitalisms respond to globalization, it is essential to describe the institutional diversity of Asian welfare capitalisms and the welfare–risk nexus. This paper defines four types of Asian welfare capitalisms based on social spending data and investigates the welfare–risk nexus by focusing on globalization risks, such as a globalized production process, trade openness, and financial integration. The empirical results based on multiple factor analysis and cluster analysis clearly show that Asian welfare capitalisms are heterogeneous and that four clusters can be found in the welfare–risk nexus based on the dimensions present in Asian economies in the 2000s. This analysis stresses that globalization has different effects on these types of Asian welfare capitalisms according to their welfare–risk nexuses.

Keywords:

• Asian economies
• varieties of capitalism
• globalization
• welfare capitalism
• institution
• multiple factor analysis
• cluster analysis

Notes on contributor

Hironori Tohyama is a professor at the Shizuoka University, Department of Economics, in Japan. He has published books and articles in the field of comparative political economy.

Notes

1. While data on the percentage of total government expenditure for housing and community amenities are available, data on these as a percentage of GDP are not.

2. Because the Asian economies except Japan and Korea are not included in the OECD Social expenditure database, the most used database for international comparison of social policy, we utilize the social expenditure data collected by Asian Development Bank (ADB). However, it should be noted that the ADB data on government expenditures are taken from each country source and that the coverage of data is not standardized across the region. As a result, the share of government spending on social expenditures in Korea and Taiwan could be underestimated in ADB data because the two economies have established a separate accounting system for health insurance. Accordingly, their expenditures on health are excluded from central government fiscal statistics. In order to address the problem of underestimation, we take into account the expenditures on education as well as health when assessing the degree to which each Asian economy focuses on building human capital.

3. For further details on MFA, see Abdi and Valentin (2007). In this analysis, we use an R package for multivariate analysis, FactoMineR (http://factominer.free.fr).

4. We refer to infrastructure that is expected to improve the environment necessary for an economy or enterprise to smoothly function as social capital; accordingly, investments in infrastructure including housing or community facilities are referred to as social capital formation.

5. Harada and Tohyama (2011) illustrate the kind of empirical evidence that might help identify the characteristics of Asian welfare regimes. They found four groups among the Asian economies clearly distinguished from the advanced economies by investigating the Asian economies and the advanced ones together in terms of institutional configurations. From their result, we might distinguish a productive type from a protective one in Asian welfare regimes. However, since their focus is not on welfare regimes, we need to compare the Asian welfare regimes with the advanced ones in order to clarify how the Asian welfare regimes can be characterized more precisely.

6. This result is consistent with that presented by Lue and Park (2013), who provide an overview of the changes in East Asian welfare capitalisms in terms of the welfare–work nexus.

7. The observation years are 1995, 2000, 2005, 2008, and 2009.

8. As shown later, Hong Kong forms a different cluster because of this.

9. Ahn and Lee (2012) indicate that the risks of an aging population are strongly related to social security and welfare, based on a case study in Korea.

10. In a cluster analysis, we need to determine the solution with the optimal number of groups, that is, the number of groups that “best” fits the data. As a stopping rule, we used the following criterion:

,

where is the between-clusters inertia increase when moving from to q clusters, (and , respectively) is the minimum (or maximum, respectively) number of clusters chosen by us. Starting from the largest partition (i.e. a downward approach), we searched for the partition which minimized the criterion. As a result, we found that four clusters was an optimal number.

11. We have projected welfare expenditure and the risks such as globalization, aging, or unemployment onto the same plane. This allows us to clarify the relationship between them. However, to be precise, it only shows the juxtaposition between them, and not the causal relationship between them. The problem of whether and how risks cause each Asian welfare regime to change remains for further research.