This book develops an evolutionary economics approach to welfare state dynamics. Welfare states are complex settings, including social insurance, social assistance and universal provisions. Their main aim is to shelter household incomes from instability and redistribute incomes. The book analyses welfare states in terms of how they pool business cycle uncertainty between the state (social security), firms, and households. The evolutionary and institutional analysis of welfare states, focusing in particular on labour market segmentation and national-level policy design, is applied to two particular cases: a Southern European country (Portugal) and a deep-rooted European welfare state (France). These two countries have introduced similar social protection reforms and experienced similar crises, yet the two welfare states are very different. The book explores and explains why that should be the case. It will be of interest to researchers and students of institutional and evolutionary economics, welfare states, and European politics.