Liberalization in times of crises? : A comparative study of labour market policy responses to the Covid-19 pandemic

Abstract: The Covid-19 pandemic has generated a serious stress test for welfare states and welfare state institutions. This challenge has been met by unprecedented responses from governments, most notably countrywide shutdowns of substantial sections of economies to facilitate social distancing. Consequently, the health crisis was followed closely by an economic crisis. This situation has created a possibility study a process that predates the pandemic, namely liberalization. The thesis applies the theories of Thelen (2014), who claims that while there is an ongoing liberalization in welfare states, there are varieties of liberalization. She refers to the three trajectories of change deregulatory liberalization, dualizing liberalization and embedded flexibilization. The aim of the thesis is to enhance our understanding of how these varieties of liberalization are affected when countries are faced by massive external change. In pursuing this goal, I construct an analytical framework that illustrates the expected labour market policy responses for two of the three trajectory of change. I then conduct a comparative case study of labour market policy responses in Denmark, the Netherlands, Germany, and Sweden. I compare the expected responses with the actual labour market policy responses to the crisis to detect how their responses relate to the trajectories of change towards liberalization. The findings suggest that while the countries have implemented rather similar responses to the crises, some countries’ path towards liberalization has been strengthened by their labour market policy responses, while other countries have diverted from their path towards liberalization during the Covid-19 crisis. The bigger take-aways from these findings are that the process of liberalization will be affected differently due to countries differing paths towards liberalization, as well as their inherent institutional structures. The findings thus highlight the significance of both path dependence and differing trajectories of change concerning the effects of the Covid-19 crisis on the process of liberalization.