The Politics of Economic Adjustment in a Liberal Market Economy: The Social Compensation Hypothesis Revisited

The 'compensation hypothesis' holds that increasing trade exposure gives rise to pressures for an expansion in public spending, especially on welfare items. We argue that the underlying relationship between economic openness and public spending and particularly on welfare effort in Ireland...

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Bibliographic Details
Published in:Irish political studies 2008-12, Vol.23 (4), p.599-626
Main Authors: Hardiman, Niamh, Murphy, Patrick, Burke, Orlaith
Format: Article
Language:English
Subjects:
Area studies
Compensation
European Union
Government Spending
Ireland
Market Economy
Political conditions
Structural adjustment
Trade
Welfare
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Summary:The 'compensation hypothesis' holds that increasing trade exposure gives rise to pressures for an expansion in public spending, especially on welfare items. We argue that the underlying relationship between economic openness and public spending and particularly on welfare effort in Ireland shows a surprising consistency that is at odds with this hypothesis. Our preliminary estimates show a persistently weak relationship between trade openness and 'social compensation', unlike the experience of other small open economies. We seek to explain these findings with reference to both structural economic constraints and domestic political preferences.
ISSN:0790-7184
1743-9078
DOI:10.1080/07907180802452838