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Sustainable Social Spending

Author

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  • Assar Lindbeck

Abstract

The paper discusses a number of threats to the financial sustainability of social spending: increased internationalization of national economies, gradually higher relative costs of producing a number of human services, the "graying" of the population, slower productivity growth in the private sector, low employment rates, and various types of disincentive effects related to the welfare state itself, including moral hazard. I argue that threats from gradually rising costs of providing human services and disincentive effects of welfare-state arrangements, in particular moral hazard and benefit dependency, are more difficult to deal with than the other threats. I also discuss the choice between ad hoc policy reforms and automatic adjustment mechanisms, delegated to administrative bodies, for dealing with these threats.

Suggested Citation

  • Assar Lindbeck, 2005. "Sustainable Social Spending," CESifo Working Paper Series 1594, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1594
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    References listed on IDEAS

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    1. 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.
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    Citations

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    Cited by:

    1. Gerdie Everaert & Freddy Heylen & Ruben Schoonackers, 2015. "Fiscal policy and TFP in the OECD: measuring direct and indirect effects," Empirical Economics, Springer, vol. 49(2), pages 605-640, September.
    2. Erling Holmøy & Kyrre Stensnes, 2008. "Will the Norwegian pension reform reach its goals? An integrated micro-macro assessment," Discussion Papers 557, Statistics Norway, Research Department.
    3. Frederick van der Ploeg, 2007. "Sustainable Social Spending and Stagnant Public Services: Baumol's Cost Disease Revisited," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(4), pages 519-547, December.
    4. Andersen, Torben M & Kreiner, Claus Thustrup, 2013. "Baumol’s cost disease and the sustainability of the welfare state," CEPR Discussion Papers 9772, C.E.P.R. Discussion Papers.
    5. Eduardo Wiesner, 2008. "The Political Economy of Macroeconomic Policy Reform in Latin America," Books, Edward Elgar Publishing, number 12913.
    6. Torben M. Andersen, 2016. "Does The Public Sector Implode From Baumol'S Cost Disease?," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 810-818, April.
    7. Torben Andersen, 2007. "The Scandinavian Model – Prospects and Challenges," CESifo Working Paper Series 1903, CESifo Group Munich.
    8. repec:bla:econom:v:84:y:2017:i:335:p:417-429 is not listed on IDEAS

    More about this item

    Keywords

    sustainable fiscal policy; Baumol’s disease; moral hazard; automatic adjustment mechanisms;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs

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