Does ethnic fragmentation negatively affect social expenditure? In this thesis, I examine why this research question, only partially tackled by the political economy literature, is also central for the social policy field. Using a sample of 156 countries, and controlling for variables that social policy theory postulate as essential to explain welfare provision, I offer evidence that higher levels of ethnic fragmentation lead to lower levels of social expenditure. On that basis, I present a theoretical framework that explores how this relationship can be explained. Ethnic fragmentation is presented as a variable that complicates the development of social solidarity and the notions of shared identity, and shifts social mobilisation from issues of economic redistribution towards ethno-cultural recognition. I also conduct a second series of statistical analysis that show that there is evidence to support the previous propositions. Additionally, using a different confirmatory test, I explore the correspondence between the levels of de-commodification that 18 welfare states provide, and the principles of blood descent (jus sanguinis) or civic ties (jus solis) that their respective national laws favour. The findings show that the welfare regimes with the most de-commodifying provision tend to favour ethno-cultural principles. Finally, I emphasize that the probable effects of ethnic fragmentation in an increasingly multicultural world, with its tendencies to put social integration and differentiation issues back on the agenda, are not a prediction of erosion of the welfare state, but an important element to take into account in the creation and robustness of shared identities and notions of common belonging when designing social policy.