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A Dynamic Explanation of the Crisis of the Welfare State

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  • Christophe Hachon

    () (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

Although the crisis of the Welfare State has been evoked for quite a long time, figures show that such a phenomenon has arisen only recently. Furthermore, it is not a common feature in all developed countries. This paper aims at explaining these two empirical facts. We use an overlapping generations model in which agents decide to educate themselves or not endogenously. Furthermore, at each date, the working population vote on the size of a redistributive policy. Firstly, we show that the share of the educated population can be the engine of the crisis of the Welfare State. Moreover, our paper emphasizes that the expectations of agents about the size of redistributive policies, can explain the timing differential in the crisis of the Welfare State between developed countries.

Suggested Citation

  • Christophe Hachon, 2009. "A Dynamic Explanation of the Crisis of the Welfare State," Working Papers halshs-00371205, HAL.
  • Handle: RePEc:hal:wpaper:halshs-00371205
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00371205
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    References listed on IDEAS

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    1. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
    2. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
    3. Roberto Perotti, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Oxford University Press, vol. 60(4), pages 755-776.
    4. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
    5. Bellettini, Giorgio & Berti Ceroni, Carlotta, 2007. "Income distribution, borrowing constraints and redistributive policies," European Economic Review, Elsevier, vol. 51(3), pages 625-645, April.
    6. Bisin, Alberto & Verdier, Thierry, 2000. "A model of cultural transmission, voting and political ideology," European Journal of Political Economy, Elsevier, vol. 16(1), pages 5-29, March.
    7. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    8. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
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    Keywords

    Welfare State; Indeterminacy; Education; Redistribution;

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