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Social insurance competition between Bismarck and Beveridge

  • Cremer, Helmuth
  • Pestieau, Pierre

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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Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 54 (2003)
Issue (Month): 1 (July)
Pages: 181-196

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Handle: RePEc:eee:juecon:v:54:y:2003:i:1:p:181-196
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  1. repec:cup:cbooks:9780521047593 is not listed on IDEAS
  2. CASAMATTA, Georges & CREMER, Helmuth & PESTIEAU, Pierre, . "Political sustainability and the design of social insurance," CORE Discussion Papers RP 1449, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. 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).
  4. Cremer, Helmuth & Pestieau, Pierre, 2002. "Factor Mobility and Redistribution: A Survey," IDEI Working Papers 154, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2003.
  5. CREMER, Helmuth & FOURGEAUD, Virginie & LEITEÂ MONTEIRO, Manuel & MARCHAND, Maurice, 1995. "Mobility and Redistribution : A Survey," CORE Discussion Papers 1995066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. 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).
  7. Haufler, Andreas, . "Taxation in a Global Economy," Monographs in Economics, University of Munich, Department of Economics, number 20387.
  8. CREMER, Helmuth & PESTIEAU, Pierre, . "Social insurance, majority voting and labor mobility," CORE Discussion Papers RP 1328, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. 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.
  10. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September.
  11. Philippe De Donder & Jean Hindriks, 1998. "The political economy of targeting," Public Choice, Springer, vol. 95(1), pages 177-200, April.
  12. 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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