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Benefits conditional on work and the Nordic model

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  • Kolm, Ann-Sofie
  • Tonin, Mirco

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 in counteracting the negative impact of taxation.

Suggested Citation

  • Kolm, Ann-Sofie & Tonin, Mirco, 2015. "Benefits conditional on work and the Nordic model," Journal of Public Economics, Elsevier, vol. 127(C), pages 115-126.
  • Handle: RePEc:eee:pubeco:v:127:y:2015:i:c:p:115-126
    DOI: 10.1016/j.jpubeco.2014.05.010
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    References listed on IDEAS

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    Cited by:

    1. Hung-Ju Chen & Xiangbo Liu, 2015. "International Migration, Skill Acquisition and Matching Frictions," Economics Bulletin, AccessEcon, vol. 35(3), pages 1469-1476.
    2. L. Behrenz & L. Delander & J. Månsson, 2016. "Is Starting a Business a Sustainable way out of Unemployment? Treatment Effects of the Swedish Start-up Subsidy," Journal of Labor Research, Springer, vol. 37(4), pages 389-411, December.

    More about this item

    Keywords

    Nordic model; In-work benefits; Wage adjustment; Unemployment; Education; Skill formation; Earnings;

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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