Can Latin American Production Regimes complement Universalistic Welfare Regimes? Implications from the Costa Rican Case

Abstract

Much of the literature on political economy expects complementarities between (universal) welfare regimes and production regimes. This article draws from Costa Rica’s showcase of human development and universalistic social policies to address how the production regime supports and constrains the welfare regime. We show that there were some positive relations between the two regimes at various points but that they were neither fully nor mostly complementary. At the heart of our interpretation of Costa Rica’s performance—and Latin America’s pervasive lack of complementarities—lies the dominance of structural heterogeneity in the production regime. Our analysis has signifi cant implications for current theoretical and policy debates in Costa Rica and elsewhere. At the theoretical level, we highlight key features of production in Latin America and the need to consider such material bases as part of robust welfare policies. At the policy level, our argument stresses the importance of promoting both leading and lowproductivity sectors simultaneously and of securing stable funding mechanisms for the welfare regime. Our article thus offers a cautionary note to Latin American countries slowly moving toward the creation or re-creation of universal social programs in the context of relatively unchanged production regimes. Since tensions between production and welfare regimes may also be appearing in a growing number of postindustrialized developed countries, theoretical and policy implications can easily travel beyond Latin America. Much of the political economy literature on developed countries assumes that national economic institutions build positive and lasting relations with social arrangements. Complementarities between the production and welfare regimes are not only expected but also considered a necessary condition for simultaneously achieving economic growth and equitable income distribution. In particular, universal social policies are expected to go hand in hand with production regimes that can effectively use skilled workers, improve productivity, and secure stable funding