The Economy of Obligation: Incomplete Contracts and the Cost of the Welfare State
AbstractWestern governments typically pay out some 30 percent of GDP for social purposes. This is financed by taxation on a pay-as-you-go (PAYGO) basis. How efficient are these transfers, and can market or other mechanisms do it better? The problem arises since no individual stands alone. During the life cycle there are several periods of unavoidable dependency, in which there is no earning and little to bargain with: motherhood, infancy, childhood, education, illness, disability, unemployment, old age. The problem is how to transfer resources from ‘producers’ to ‘dependants’ over the life cycle. The market solution is for individuals to accumulate financial assets and to transfer them over the life cycle by means of long-term contracts with financial intermediaries.
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Bibliographic InfoPaper provided by Economics Group, Nuffield College, University of Oxford in its series Oxford University Economic and Social History Series with number _103.
Length: 41 pages
Date of creation: 15 Aug 2012
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Web page: http://www.nuff.ox.ac.uk/economics/
This paper has been announced in the following NEP Reports:
- NEP-AGE-2012-09-22 (Economics of Ageing)
- NEP-ALL-2012-09-22 (All new papers)
- NEP-HIS-2012-09-22 (Business, Economic & Financial History)
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- Aled Davies, 2012. "The Evolution of British Monetarism: 1968-1979," Economics Series Working Papers Number 104, University of Oxford, Department of Economics.
- Avner Offer, 2013. "Narrow Banking, Real Estate, and Financial Stability in the UK, c.1870-2010," Economics Series Working Papers Number 116, University of Oxford, Department of Economics.
- Aled Davies, 2012. "The Evolution of British Monetarism: 1968-1979," Oxford University Economic and Social History Series _104, Economics Group, Nuffield College, University of Oxford.
- Avner Offer, 2013. "Narrow banking, real estate, and financial stability in the UK, c.1870-2010," Oxford University Economic and Social History Series _116, Economics Group, Nuffield College, University of Oxford.
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