Does Diversity Undermine the Welfare State? Evidence from the Provision of Local Public Services in European Regions

The management of the welfare state in a heterogeneous society is a growing challenge in Europe. This paper investigates the relationship between diversity and the welfare state by studying the citizens' satisfaction about public services across European regions; it also establishes a link between research on diversity and the welfare state, and fiscal federalism theory, by focusing on the provision of local public services. We employ region level indicators of the citizens' perception of local public services, regional autonomy, and regional diversity based on nationalities. We find that i) diversity is negatively correlated with the quality of local public services; and ii) regional autonomy partially improves the quality in the presence of diversity. When using objective measures of public services, the results are less robust; this raises an issue about the citizens' perception about the functioning of the welfare state in heterogeneous communities which deserves attention from policy makers.