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The Threat to the German Welfare State

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  • Hans-Werner Sinn

Abstract

Germany is in a dilemma. Low wage competition via product and factor markets increases the demands on the welfare state, but increased systems competition in the context of international factor mobility reduces the possibilities of maintaining it. The welfare state has important allocative functions. It is an insurance against career risks and it stimulates risk taking and economic growth. However, it also has severe moral hazard effects by reducing work incentives. To help the welfare state survive and improve its performance, the paper advocates the home country principle for the treatment of immigrants, the introduction of funded elements in the pension system, and employment subsidies at the expense of ordinary welfare payments.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2000/wp-cesifo-2000-07/cesifo_wp320.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 320.

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Date of creation: 2000
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Handle: RePEc:ces:ceswps:_320

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  1. Hans-Werner Sinn, 1998. "The Pay-As-You-Go Pension System as a Fertility Insurance and Enforcement Device," NBER Working Papers 6610, National Bureau of Economic Research, Inc.
  2. Sinn, Hans-Werner, 1996. "Social Insurance, Incentives and Risk Taking," Munich Reprints in Economics, University of Munich, Department of Economics 19834, University of Munich, Department of Economics.
  3. Sinn, Hans-Werner, 1990. "Tax harmonization and tax competition in Europe," European Economic Review, Elsevier, vol. 34(2-3), pages 489-504, May.
  4. Nickell, Stephen J & Symons, James, 1990. "The Real Wage-Employment Relationship in the United States," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 8(1), pages 1-15, January.
  5. Burgess, Simon M, 1988. "Employment Adjustment in UK Manufacturing," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 98(389), pages 81-103, March.
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Cited by:
  1. Laura Chadwick & Jürgen Volkert, 2003. "Making Work Pay: U.S. American models for a German context?," IAW Discussion Papers, Institut für Angewandte Wirtschaftsforschung (IAW) 08, Institut für Angewandte Wirtschaftsforschung (IAW).
  2. Giancarlo Corsetti & John Flemming & Seppo Honkapohja & Willi Leibfritz & Gilles Saint-Paul & Hans-Werner Sinn & Xavier Vives, 2002. "Welfare to Work," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 2002(CESIFOFOR), pages 71-86, 04.
  3. Rüdiger Waldkirch & Matthias Meyer & Karl Homann, 2009. "Accounting for the Benefits of Social Security and the Role of Business: Four Ideal Types and Their Different Heuristics," Journal of Business Ethics, Springer, vol. 89(3), pages 247-267, November.
  4. Lindbeck, Assar, 2003. "Improving the Performance of the European Social Model - The Welfare State over the Life Cycle," Working Paper Series, Research Institute of Industrial Economics 587, Research Institute of Industrial Economics.
  5. Wagner, Ulrich, 2002. "Beschäftigungshemmende Reformstaus in der Bundesrepublik Deutschland und wie man sie auflösen könnte," Beiträge der Hochschule Pforzheim 102, Pforzheim University.
  6. Antonis Adam & Thomas Moutos, 2006. "A Politico-Economic Analysis of Minimum Wages and Wage Subsidies," CESifo Working Paper Series 1810, CESifo Group Munich.

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