Why have trends in government welfare spending in developing countries diverged from those in developed countries? I address this question by investigating the effects of capital and trade flows on government welfare spending in fifty-three developing countries. Using an original measure of labor power in developing countries, I test the links between international markets, labor's political strength, and the welfare state. I argue that labor's collective-action problems, caused by large populations of low-skilled and surplus workers, offset labor's potential political gains from globalization. I show that when the proportion of low-skilled workers in a nation is high, globalization will lead to a decline in welfare spending. Most significantly, the results suggest that in nations where labor-market institutions are not yet well developed, government social-welfare spending is constrained by international market, forces.
Nita Rudra is Assistant Professor of the Graduate School of Public and International Affairs at the University of Pittsburgh, Pittsburgh, Pennsylvania. She can be reached at firstname.lastname@example.org.