Among the most significant issues facing welfare states are the implications of economic globalization for employment policies. This issue is confronted from the viewpoint of workfarism, the incentives created by social policies for increasing participation in the labor market. To measure the limited changes involved, the analytical framework also includes institutional stickiness, pointing to the capability of welfare state institutions to resist external pressures. Panel data on capital flow, an active labor market policy (ALMP), and unemployment benefit (UB) expenditures in 19 welfare states between 1985 and 2010 are drawn from the Organisation for Economic Cooperation and Development (OECD) and the KOF Index of Globalization (KOF). The Vector Autoregressive Moving-Average model with exogenous regressors (VARMAX)-regression analysis found institutional stickiness to be a more significant factor than capital flow in 61% of the observations. The impact of capital flow was particularly significant in the United Kingdom, and in northern and continental Europe, and a tendency toward workfarism was detected in 37% of the welfare states. From a comparative perspective, the impact via the increased capital flow to workfare-related policies is a matter of contrasts rather than a unilateral phenomenon.

Knowledge on the determinants of Active Labour Market Policy (ALMP) spending accumulated during the 2000s. Despite these advances, the current research lacks a systematic approach to the relevant determinants. This article fills the research gaps by analysing simultaneously the 14 most frequently used determinants for the first time. In addition to these variables, this study introduces a new factor, namely the impact of economic crises. Through the analysis of the longest data period yet investigated of 20 Western countries and a comparison of methodological alternatives, this study both challenges and reinforces previous findings, as well as produces new ones. For example, it is the first investigation to reveal the positive effect of government indebtedness and economic crises on ALMP expenditure. However, the rivalry between the "usual suspects" continues, as the negative effects of budget deficits, foreign trade, and population ageing, and the positive effects of trade union density and GDP growth, were rediscovered in this analysis.