Party competition and unemployment benefits in Germany : how a small change in electoral demand can make a big difference

This paper points out the importance of party competition in explaining reforms of unemployment benefits in Germany during the phase of welfare state restructuring. In recent research the role of institutions has been stressed for explaining a lack of fundamental reforms and the tilted distributional impact of the more incremental reforms in the German labour market. While these factors do play a role this paper argues that policy stability was largely also due to electoral factors. Moreover, the more recent significant reforms (“Hartz reforms”) can not be satisfactorily explained by institutionalist approaches. On the other hand, the few existing studies on party competition and the German welfare state have also trouble in accounting for these fundamental reforms because they focus strongly on electoral demand, which has shifted only to a limited extent in favour of reducing social benefits. By contrast, this paper shows that the structure of the party system has exacerbated the effect of this moderate demand shift. On a more general theoretical level this paper makes a case for the importance of party competition as an explanatory factor in comparative welfare state research.