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Financial Restraints in a Mature Welfare State - The Case of Denmark




The Scandinavian welfare states are mature in the sense of having a high level of standards for publin provisions of welfare services as well as a high replacement level for income transfers, especially for low income groups. In this welfare model, individuals have basic rights to welfare services and social transfers indepedently of their ability to pay, their labour market history etc. The financial viability of the model relies on a high tax burden and a high level of labour force participation for males and females. Evaluated on the basis of international comparisons of income levels and inequality, the model has perfomed well. In a forward looking perspective, however, the welfare model faces problems that may bring the financial viability of the model at stake. Two important challenges are demographic changes and the so-called growth dilemma (increased demand for services and leisure). We discuss these issues using Denmark as an example and argue that while these two challenges may be of the same order of magnitude, it is easier to propose solutions to the demographic challenges that to the growth dilemma which are consistent with the basic principles of the welfare state.

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  • Torben M. Andersen & Lars Haagen Pedersen, 2006. "Financial Restraints in a Mature Welfare State - The Case of Denmark," DREAM Working Paper Series 200601, Danish Rational Economic Agents Model, DREAM.
  • Handle: RePEc:dra:wpaper:200601

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    Cited by:

    1. Torben M. Andersen, 2015. "The Nordic welfare model and welfare services - Can we maintain acceptable standards?," Economics Working Papers 2015-02, Department of Economics and Business Economics, Aarhus University.
    2. Westerhout, Ed, 2018. "Paying for the Ageing Crisis : Who, How and When?," Other publications TiSEM 417903d2-6318-4744-891e-1, Tilburg University, School of Economics and Management.
    3. Holmøy, Erling & Strøm, Birger, 2013. "Computable General Equilibrium Assessments of Fiscal Sustainability in Norway," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 105-158, Elsevier.
    4. Westerhout, Ed, 2018. "Paying for the Ageing Crisis : Who, How and When?," Discussion Paper 2018-001, Tilburg University, Center for Economic Research.
    5. Andersen, Torben M., 2012. "Fiscal sustainability and demographics – Should we save or work more?," Journal of Macroeconomics, Elsevier, vol. 34(2), pages 264-280.

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