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Social Insurance Competition between Bismark and Beveridge

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  • Cremer, Helmuth
  • Pestieau, Pierre

Abstract

The European Union consists of a wide variety of welfare states with social insurance schemes ranging from those providing earnings related benefits (Bismarckian) to fat rate benefits (Beveridgean) systems. The conventional wisdom is that with factor mobility poor people have incentives to move towards Beveridgean countries and rich individuals to move out of them. Consequently, Beveridgean regimes would not be sustainable; they would have to adapt or to perish. This paper studies the validity of such a conjecture within a simple model. It is shown that mobility does have a significant impact on social protection. However, the equilibrium patterns that can emerge are more complex and diversified than the initial conjecture suggests. In some cases, the equilibrium may even imply that all the poor move to the Bismarckian country.

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Bibliographic Info

Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 141.

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Date of creation: 2002
Date of revision: 2003
Publication status: Published in Journal of Urban Economics, vol.�54, 2003, p.�181-196.
Handle: RePEc:ide:wpaper:632

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  1. CREMER, Helmuth & PESTIEAU, Pierre, . "Reforming our pension system: is it a demographic, financial or political problem?," CORE Discussion Papers RP -1468, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. CREMER, Helmuth & FOURGEAUD, Virginie & LEITE-MONTEIRO, Manuel & MARCHAND, Maurice, . "Mobility and redistribution: A survey," CORE Discussion Papers RP -1371, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Haufler,Andreas, 2001. "Taxation in a Global Economy," Cambridge Books, Cambridge University Press, number 9780521782760.
  4. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2000. "Political sustainability and the design of social insurance," Journal of Public Economics, Elsevier, vol. 75(3), pages 341-364, March.
  5. Laszlo Goerke, 2000. "Bismarck versus Beveridge. Flat-Rate and Earnings-Related Unemployment Insurance in a General Efficiency Wage Framework," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(3), pages 243-, May.
  6. Cremer, Helmuth & Pestieau, Pierre, 2002. "Factor Mobility and Redistribution: A Survey," IDEI Working Papers 154, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2003.
  7. Philippe De Donder & Jean Hindriks, 1998. "The political economy of targeting," Public Choice, Springer, vol. 95(1), pages 177-200, April.
  8. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September.
  9. CREMER, Helmuth & PESTIEAU, Pierre, 1996. "Social insurance and labor mobility : a political economy approach," CORE Discussion Papers 1996061, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Georges Casamatta & Helmuth Cremer & Pierre Pestieau, 2001. "Demographic Shock and Social Security: A Political Economy Perspective," International Tax and Public Finance, Springer, vol. 8(4), pages 417-431, August.
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