Cheol-Sung Lee University of Chicago

1. The Institutional Origin of Social Trust: The Configuration of Social Policies and The Coordination of Interests in Rich Democracies Cheol-Sung Lee University of Chicago

2. Overall Research Agenda I • Dissertation (Completed in 2005) The Social Bases and Outcomes of Welfare States in the Era of Globalization and Post-Industrial Economy  “Income Inequality, Democracy, and Public Sector Size” (ASR 2005)  “Income Inequality, Global Economy, and the State” (SF 2007)

3. An Inverted U-shaped Relationship between Public Sector Size and Income Inequality in 64 Countries, 1970 to 1994

4. Transition to Democracy Institutionalized Democracy Autocracy or Limited Democracy Theoretical Models of the Relationships between Public Sector Size and Income Inequality: A Curvilinear Model and An Interaction Model Income Inequality (Gini) Public Sector Size (Government Tax Revenue: % of GDP)

5. Positive Effects of Public Sector Size on Income Inequality in Autocracy or Limited Democracy, 125 Observations on 36 Countries

6. Negative Effects of Public Sector Size in Fully Institutionalized Democracy, 216 Observations on 32 Countries

7. Overall Research Agenda II • Civic Association Networks and Institutional Performances  “Labor Unions and Good Governance” (ASR 2007)  “Unions’ Brokerage and Gender Equality” (R&R in AJS)  Unions in Network (Book Manuscript)

8. 2.1.Sweden s 2.2. United States Sports Welfare Union Sports Union Church Church Culture Culture Profe -ssional Health Union Union Union Health Sports Culture Culture Culture Welfare Local Church Youth Church Welfare 2.3. South Korea 2.4. Argentina 2.5. Russia

9. Nordic Countries : Denmark

10. Liberal Countries :The United States

11. Conservative Countries : Japan

12. Overall Research Agenda III  Sectoral Conflicts and Distributional Outcomes in Post-Industrial Democracies (Forthcoming in ASR)  Sectoral Conflicts and Collapse in Wage Bargaining Institutions (Work in Progress)

13. Over-time Inequality Trajectories: Nordic Countries Note: Idn denotes country code: 5 = Denmark, 6 = Finland, 14= Norway; 15 = Sweden

14. Sectoral Conflicts and Formation of Cross-class Alliances Stage I. Inter-class Conflict and Coordinated Wage Bargaining Public Sector Employees Public Sector Employers Export Sector Employers Export Sector Employees

15. Stage II. Emergence of Sectoral Conflicts Public Sector Employees Public Sector Employers Export Sector Employees Export Sector Employers

16. Stage III. Cross-Class Alliances Public Sector Employees Public Sector Employers Export Sector Employers Export Sector Employees

17. Collapse of Coordinated Wage Bargaining (High) Productivity Gap between Sectors (Increasing) Income Inequality (High)Public Sector Employment (High) Inter-sectoral Conflicts (Decreasing or Stagnant) Total Employment Sectoral Conflicts and Formation of Cross-class Alliances (High)Wage Differentials within Private Sector (High)Wage Differentials between Private and Public Sectors

18. Overall Research Agenda: Other and Future Projects Developmental States and Research Fraud in Asia (2010 SF)  Institutional Origin of Social Trust (R&R in SF) (Today)  The Development and Retrenchment of Welfare States in Less Developed Countries (Next 3-5 Years)

19. Formal and Informal Control of Scientific Misconduct

20. Overview of This TalkInstitutional Origin of Social Trust • To explore the role of social policy design and skill formation in accounting for social trust • To bring sociological perspectives (social exchange theory and institutional theory) into comparative political economy • To re-situate the conventional knowledge of welfare state-trust linkage • To conduct empirical Data Analyses using four waves of World Values Surveys for 17 rich democracies

21. What is trust & Why Does it Matter? • Trust: “Placing resources at the disposal of another party” (Coleman) • Trust Matters because: √ Basic Source of Social Order √ Source of Efficiency in Transactions √ Positive Social and Political Outcomes

22. Non-economic Social Relation-based Interest and Transaction-based Cultural Norm-based Dimensions and Sources of Trust • Associational/ Community-based • Cultural/ Psychological • Social Exchange √ Structure of exchange √ Sanctioning and monitoring mechanisms √ Information of social identities (trustworthiness) • Institutional

23. 50 trustpop 45 40 30 25 1980 1985 1990 1995 2000 year Australia Canada UK US Cross-national and Over-time Variations in Trust a. Residual (Liberal) Countries

24. 65 60 55 50 trustpop 45 40 1980 1985 1990 1995 2000 year Denmark Finland Netherlands Norway Sweden Cross-national and Over-time Variations in Trust b. Universal (Social Democratic) Countries

25. trustpop 40 35 30 25 20 1980 1985 1990 1995 2000 year Austria Belgium France Germany Italy Japan Cross-national and Over-time Variations in Trust c. Social Insurance (Conservative) Countries

26. Micro-Macro Combinational Model of Trust Employers’ Trust of General Others Employers Welfare State Institutions Local, Cultural or Structural Factors Employees’ Trust Of General Others Employees

27. A B D C A B C D Social Exchange and Social Dilemma(Cook and Colleagues) Group Generalized Exchange Network-generalized Exchange

28. T = 2 T = 3 C B ALMP/ PSST ALMP/ PSST A B C A D D Social Exchange Process among Four Labor Market Actors around ALMP (Active Labor Market Policies) in Universal Countries A: Skilled B: Unskilled C: Unemployed D: Employers T = 1 A ALMP/ PSST B C D

29. Social Exchange Process under Firm-centered Training in Social Insurance Countries A: Skilled B: Unskilled C: Unemployed D: Employers Social Insurance/ Assistance Insiders Outsiders C A B • Firm level Training • Higher Wage & Benefit • Strong Employment Protection • Generous Earning-related Insurance • Little Training • Lower Wage • Weak Employment Protection • Inferior Earning-related Insurance D1 D2 Skill-based Division

30. Supplement: Social Exchange Process along Racial Division in Residual Countries A: Skilled B: Unskilled C: Unemployed D: Employers Social Insurance/ Assistance Majority Minority C Immigration A B • Strong Educational Credentials (General Skills) • Individual Bargaining • Strong Community Resources • Weak Educational Credentials • Low Wage • Low Social Protection • Weak Community Resources D1 D2 Labor Market Division + Residential Segregation

31. Social Exchange Structures & Welfare State Functions (T>1)

32. Degree and Scope of Encapsulation of Mutual Interests

33. Supplement: Decision-Making ProcessSkilled Workers and Employers’ Decision in Three Welfare Regimes A’s (or D’s) Decisions cf. Decision Choice for B and C? Labor Solidarity of Entire Working Class Strong? Yes No Stay with ALMP Defect ALMP Is A strongly organized? Universal Countries Residual Countries No Yes Skill Depreciation for A Firm-level Skill Training with D (or A) Social Insurance Countries Skill and Labor Control for D Outsourcing/FDI/Immigrants

34. Causal Flows Power Constellation Institutional Design Interest and Trust

35. Building Hypotheses:Social Policies as a Source of Trust--Universal Countries -- • ALMP-based skill provision provides both monitoring mechanisms and incentives to participate in skill exchange process for all actors  Employees: High confidence in maintaining stable living conditions  Employers: High confidence in upgrading skill levels with relative flexibility • Hypothesis 1: Public provision of skill investment will lead to a higher level of social trust.

36. Building Hypotheses:Social Policies as a Source of Distrust-- Social Insurance Countries -- • Strong Distinction between Insiders and Outsiders • Social insurance programs (originating from firm-level training) perpetuate skill-based status hierarchy  Employees: No need to find commonalities  Employers: Little Flexibility, High Tax and Co-pay Burden • Hypothesis 2: Higher reliance on corporatist models of insurance programs will lead to lower level of social trust.

37. Building Hypotheses:Testing the Effects of Institutional Configuration on Trust • Passive Social Transfers combined with Active Job Training Programs  All contributors perceive passive transfers as a part of employment/skill insurance, rather than philanthropic donations to the poor • Hypothesis 3: The effects of passive social transfers on trust will be conditional upon active labor market policies.

38. Data and Measures:Dependent Variable • Generalized Trust “Would you say that most people can be trusted or that you can’t be too careful in dealing with people?” (World Values Surveys) • Measurement Issues √ Particularized Trust √ Trustworthiness Generalized Trust Trust of Neighbors Trust of Colleagues Trust of Employers

39. Data and Measures:Independent Variables – Welfare State Efforts • Social Policy Spending Structure -- Measure of Skill-Supply Welfare State Efforts: ALMP Spending -- Measure of Passive Social Transfers: Sickness, Family Allowances, and Other Social Assistance and Welfare -- Measure of Institutional Design: Interaction Between ALMP and Passive Social Transfers

40. Data and Measures:Independent Variables -- Control Variables • Individual level:  Income, Gender, Age, Religion, Labor Market Status  Occupational (Class) Categories : Managers, Professionals, White Collar, Skilled Manual, Unskilled Manual, Agricultural, and Others • Country level:  Income Inequality, Ethnic Fragmentation (International Migration), GDP per capita, Unemployment Rate, Net Union Density

41. Methods: Multi-Level Logit Model • Log(Pji/(1-Pji)) = β0j + β1j (Occupational Categories)ij+ β2j (Other Individual Characteristics)ij + γij • β0j = γ00 + γ01(ALMP)j + γ02(Other Country-level Controls)j + u0j • β1j = γ10 + γ11(ALMP)j + γ12(Other Country-level Controls)j + u1j • β2j = γ20

42. Descriptive Results

43. [Skill Supply Regime  Trust] CausalityRelationship between ALMP and Trust Lowess smoother 70 NOR DEN SWE NOR NET SWE 60 SWE NOR FIN DEN CAN NET 50 USA FIN DEN IRE AUL TRUST UKM UKM JPN JPN FRG 40 AUL IRE NET JPN JPN CAN USA FRG USA IRE SWZ ITA ITA AUS FRG BEL 30 AUS UKM BEL FRG SWZ ITA BEL FRA FRA FRA Outliers: Severe Ethnic Fragmentation 20 0 .5 1 1.5 2 2.5 ALMP bandwidth = .8 Correlation Coefficient = 0.45, but 0.61 without Belgium and France

44. Regression Results from Multi-level Logit Model * significant at 10%; ** significant at 5%; *** significant at 1% Total Obs = 49,051; Results for Controls and Constants are not Shown

45. Regression Results from Multi-level Logit Model * significant at 10%; ** significant at 5%; *** significant at 1% Total Obs = 49,051; Results for Controls and Constants are not Shown

46. Predicted Probabilities of Trust by Labor Market Status/Large Industry/Occupational Categories

47. Empirical Findings • State-centered investment in workers’ skill provision leads to higher accumulation of social trust. • Contrary to popular belief, the study shows that higher government spending on pension-related benefits and social assistance-related benefits (passive social transfers) are negatively associated with social trust. • Passive social transfers have positive effects on social trust when they are jointly configured with higher spending on active labor market policies.

48. Theoretical Implications • Linked interest-based account of trust with welfare state typology and designs • Linked Employment relationships with Trust • Social Exchange Processes among Class Actors around skill formation • Importance of Institutional Design: A social policy design combining skill training and income transfers shapes a new constellation of interests and trust among labor market actors

49. Theoretical Implications • Bringing Sociology Back into Comparative Political Economy: Reformulated VC (the Varieties of Capitalism) School’s skill formation argument in the context of power resource and institutional theories. • It is the Configuration, not the Generosity of Welfare States that accounts for variations in social trust.

50. 한국사회에서의 함의 • 사회투자국가론 • 적극적 노동시장 정책과 전통적 사회지출: -- “보완적 관계” • 적극적 노동시장 정책과 보편적 복지 • 적극적 노동시장 정책과 비정규노동