Divergence as Equilibrium: The Political Dynamics of Labour Market Policies in Europe

This dissertation investigates a central paradox of contemporary European political economy: why do labour market policies continue to diverge across European countries despite shared macroeconomic shocks, increasing monetary integration, and an expanding framework of supranational coordination? Situated at the intersection of comparative political economy, welfare state research, and electoral studies, the thesis develops a sequential multi-method analysis of unemployment benefits (UB), active labour market policies (ALMPs), and labour market reforms across twenty-seven European countries between 2000 and 2019. The first part analyses the political and institutional determinants of UB and ALMP expenditure, testing competing explanations derived from Power Resource Theory, Insider–Outsider Theory, and Europeanisation. Using original panel datasets and multiple model specifications, the findings reveal a structural transformation in the post-2011 period: partisan effects collapse almost entirely after the Eurozone crisis, while fiscal constraints, employment protection legislation, and supranational governance increasingly structure national adjustment paths. Crucially, the analysis identifies a substitution effect between employment protection and UB generosity, and documents how Country-Specific Recommendations exert a consistent directional pressure toward activation without producing uniform outcomes — shaping the vocabulary of reform without homogenising welfare-state trajectories. The second part shifts the focus from policy outputs to political outcomes, examining whether outsider-oriented reforms generate electoral returns for social democratic parties. Drawing on ten waves of the European Social Survey merged with original data on party manifestos and reform trajectories, the analysis uncovers a hierarchy of mechanisms: programmatic pledges consistently produce positive attitudinal effects, while concrete reforms deliver weaker or even negative returns. However, the two interact: past delivery builds credibility, and credibility amplifies the persuasive force of programmatic appeals. Without narrative coherence linking reform to partisan identity, neither promises nor policies can sustain durable electoral support. The central problem for social democracy is less distributive than communicative — a structural mismatch between what reforms do and what voters perceive them to mean. The third part provides an in-depth qualitative analysis of the Italian Jobs Act, reconstructed through elite interviews with policymakers, trade unionists, and technical experts. The case serves as a stress test for the comparative mechanisms: a reform designed to universalise protection and modernise the labour market failed to mobilise outsiders, ruptured traditional insider coalitions, and was reduced — through a toxic symbolic shorthand — to its most divisive component. The Jobs Act exemplifies the core argument of the thesis: outsider-oriented reforms require credibility and narrative coherence to generate political returns; without them, they produce neither electoral rewards nor stable support coalitions. Taken together, the findings point to a structural misalignment at the heart of European labour market governance: supranational pressures promote activation and procedural convergence, domestic political incentives discourage redistribution toward outsiders, and institutional legacies channel common shocks into divergent national pathways. Divergence is not a failure of integration — it is its predictable outcome. This dissertation argues that the central obstacle to convergence is not institutional rigidity alone, but the growing difficulty of transforming outsider protection into a politically sustainable project in an era of eroded partisan anchoring, fragmented labour markets, and declining narrative coherence within the centre-left.