The politics of subnational social policy: Social consumption versus social investment in Austria

Abstract

Country comparisons, often suffering from unobserved heterogeneity and obscuring subnational variation, dominate the social policy literature. However, the subnational level is better suited to reduce the omitted variable bias. This article distinguishes between social consumption and social investment policies and investigates their determinants at the subnational level. Following the literature across countries, we test the role of incumbent parties’ ideology, but for within-country variation in social policy. Austria is a case in point because states have discretion in social policy (e.g., regarding public childcare and social assistance). Panel regressions covering all nine states in Austria for the years 1991 to 2019 reveal that the cabinet share of Social-Democrats increases social investment spending, while the Christian-Democratic party decreases it, and the populist radical right party reduces expenses for social consumption.