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Incentives in the Welfare-State: Lessons for would-be welfare states
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
1996 (English)Report (Other academic)
Abstract [en]

This paper deals with economic incentives and welfare-state arrangements in OECD countries; it also offers some lessons for would-be welfare states. These arrangements differ, of course, among OECD countries. In particular, there is wide variation in the extent to which countries rely on four basic institutions - the state, the firm, the family and the market. Countries also differ in their reliance on (i) a common safety net, often in the form of flat-rate benefits tied to specific contingencies; (ii) means-tested benefits for low-income groups; and (iii) income protection, i.e., benefits that are tied to previous income. Another distinction between corporatist welfare states, where benefits are tied to labor contracts, and universal welfare states in which benefits are conditional on residence or citizenship. This distinction is blurred, however, by recent tendencies in corporatist welfare states to extend coverage to individuals who have very weak attachment to the labor market, and in universal welfare states to tie benefits to previous or contemporary work under the slogan "workfare" rather than "welfare".The degree of generosity of benefits is another important distinction. Of course, the lower the benefit levels, the stronger the incentives for citizens to opt for voluntary (market) solutions, in the form of private saving and private insurance arrangements.When considering incentive problems in connection with various types of welfare-state arrangements, this paper emphasizes what may be called "dynamic" issues, i.e., incentive effects that evolve over time. These also include endogenous changes in social norms among individuals and endogenous adjustments in political behavior. This approach also makes it necessary to broaden the analysis to fields outside conventionally defined "economic analysis".

Place, publisher, year, edition, pages
Stockholm: IIES , 1996. , 33 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 604
National Category
URN: urn:nbn:se:su:diva-40892OAI: diva2:327127
Available from: 2010-06-29 Created: 2010-06-28 Last updated: 2010-08-12Bibliographically approved

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Lindbeck, Assar
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