Due to constantly rising social security budgets and negative incentives of social benefits on labour supply and growth, European social systems are put increasingly under pressure. In this situation, for social policy the question is relevant as to whether the European social transfer systems manage to achieve their goal of reducing poverty, inequality, and insecurity of existence. This issue addresses the effectiveness and efficiency of social transfer systems and is closely connected to the question of how benefits are allocated to different income groups. As this allocation is determined by the prevailing directives on social security, it may be assumed that different approaches to social security will bring about different results with respect to redistribution.

In this project, the linkage between social security strategies implemented in European social transfer systems and redistributive effects is investigated and some political economic explanations of prevailing differences are developed. Research results are intended to provide an improved information basis for political discussion on the merits and drawbacks of different social security, as well as on the feasibility of harmonising European social policy.

Research work has been organised in four stages. In a first step, a take stock and classification of the European social transfer systems was carried out. The systems were investigated with respect to the social security strategies implemented and their degree of centralisation. On the basis of the information collected, systems of indicators and classifications were developed. In the second part, the system's redistributive effects were analysed. By means of generalised Lorenz curves and a large number of inequality and poverty measures the distributive effectiveness and efficiency in different countries were calculated. The empirical results obtained were interpreted with respect to the classifications derived in the first part of the project.

In the third part of the project, political economic models will be analysed in order to derive possible explanations for the differences between the social security strategies observed. In this analysis, the focus currently is upon basic welfare benefits. In particular, two models are being developed which provide an explanation of the prevalence of strong disincentives to work generated by those benefits through, for example, means testing.

In the final stage, results will be discussed concerning the merits and shortcomings of different social security strategies with respect to redistribution. In addition, the implications of different set ups of social security systems for the feasibility of harmonising European social policy will be investigated.