ABSTRACT
This chapter investigates whether the welfare state is a barrier to economic growth, as neoliberal economists argue, or on the contrary, whether it can enhance economic efficiency along with socioeconomic development and reducing inequality. It explores whether "the efficiency thesis" concerning the relation between welfare states and globalisation is functional for economic growth or, alternatively, whether "the compensation thesis" produces better results in terms of economic growth. The chapter uses a comparative method and shows that the economic performance of the most generous welfare states, measured with a so-called performance index (PI) that combines gross domestic product (GDP) growth and labour market performances since the 2007 global financial crisis, has been considerably better. The standard classification of socioeconomic models widely used is the one proposed by Esping-Andersen according to whom welfare models can be divided into three groups: Liberal, Continental and Scandinavian models. When labour flexibility increases, inequality increases unless more welfare spending occurs.
