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In-Work Benefits and the Nordic Model

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  • Ann-Sofie Kolm
  • Mirco Tonin

Abstract

Welfare benefits in the Nordic countries are often tied to employment. We argue that this is one of the factors behind the success of the Nordic model, where a comprehensive welfare state is associated with high employment. In a general equilibrium setting, the underlining mechanism works through wage moderation and job creation. The benefits make it more important to hold a job, thus lower wages will be accepted, and more jobs created. Moreover, we show that the incentive to acquire higher education improves, further boosting employment in the long run. These positive effects help counteracting the negative impact of taxation.

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Bibliographic Info

Paper provided by Department of Economics, Central European University in its series CEU Working Papers with number 2013_1.

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Date of creation: 14 Dec 2012
Date of revision: 14 Dec 2012
Handle: RePEc:ceu:econwp:2013_1

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