Devolved Social Security Systems: Principal-agent versus multi-level governance

Abstract

This paper presents an analytical framework for comparing patterns of devolution to subnational governments and autonomous social insurance institutions in social security systems. The framework has two components. One is an analysis of financial structures along the dimensions of financial autonomy (indicated by the extent to which the administering institution raises its own revenue or depends on central grants) and financial responsibility (indicated by whether marginal costs are borne by the administering institution). The other component of the framework concerns the assignment of policy-making power; in particular, we contrast the effects of competitive and cooperative modes of devolution. The discussion uses examples from Denmark, France, Germany, the Netherlands and the USA. While we looked for ‘principal-agent’ relationships between central governments and administering institutions, we found that more complex multi-level governance structures prevailed in most cases.