The Political Economy of Unemployment Insurance

Abstract

In this dissertation, I examine questions of strategic political control through institutional design, government responsiveness to economic insecurity in social context, and opportunistic political control of bureaucratic performance in social insurance programs. I theorize how political divergence and economic forces influence institutional design, and how social and economic factors constrain social insurance generosity. I first offer a formal model of institutional choice— how and why policymakers choose to decentralize social insurance programs. I argue that ideological divergence leads to greater decentralization, and that institutional feedback through the establishment of vested interests encourages greater centralization. A study of the 1935 U.S. Social Security Act illustrates and supports this argument. In the second component of this project, I distinguish between civic and charitable forms of social capital, and I offer a theory of their respective effects on social policy responsiveness to macroeconomic dynamics. With novel data, I find support for my explanation, which challenges the fundamental arguments that Putnam and others have made. Lastly, I reexamine the political economy literature on political budget cycles by more closely considering the administrative mechanisms through which elected officials manipulate the provision of public goods and services. I extend research that points to an electoral cycle in government spending on social transfer programs by incorporating theory from the study of administrative political control. Politicians will be more successful in exerting pressure on bureaucrats to perform better, to be more generous, and timelier in processing unemployment insurance payments in the context of greater electoral competition and macroeconomic insecurity. By approaching unemployment policy institutions from these multiple perspectives, I further an understanding of the social, political, and economic influences on policies designed to alleviate economic insecurity.