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Welfare State - The Scandinavian Model

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  • Torben M. Andersen

    () (Department of Economics and Business, Aarhus University, Denmark)

Abstract

The Scandinavian countries have achieved both a high level of living standard (measured by e.g. average income) and an egalitarian outcome (measured by e.g. income inequality) despite a very large public sector and thus a large tax burden (about 50 % of GDP). The Scandinavian cluster thus poses a challenge to the standard view on the tradeoff between efficiency and equity. How come that the Scandinavian countries have been able to achieve high equality without much sacrifice of efficiency in terms of income? This paper addresses this question with the outset in recent work stressing the insurance aspect of the welfare state. A broad interpretation of the Scandinavian welfare model in terms of social insurance or common pool aspects is given. The effects of social insurance are discussed and the potential incentive problems arising in a common pool arrangement are argued to be mitigated by a number of counteracting mechanisms. Issues in policy design and the political economy of the welfare state are also discussed.

Suggested Citation

  • Torben M. Andersen, 2011. "Welfare State - The Scandinavian Model," Economics Working Papers 2011-01, Department of Economics and Business Economics, Aarhus University.
  • Handle: RePEc:aah:aarhec:2011-01
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    File URL: ftp://ftp.econ.au.dk/afn/wp/11/wp11_01.pdf
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    References listed on IDEAS

    as
    1. Gordon Winston & David Zimmerman, 2004. "Peer Effects in Higher Education," NBER Chapters,in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 395-424 National Bureau of Economic Research, Inc.
    2. Assar Lindbeck & Sten Nyberg & Jörgen W. Weibull, 1999. "Social Norms and Economic Incentives in the Welfare State," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 1-35.
    3. Assar Lindbeck & Sten Nyberg & Jörgen W. Weibull, 2003. "Social Norms and Welfare State Dynamics," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 533-542, 04/05.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Risk-sharing; incentives; common-pool problems; political support;

    JEL classification:

    • H1 - Public Economics - - Structure and Scope of Government
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • P1 - Economic Systems - - Capitalist Systems

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