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Sustainable Social Spending

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.

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 646.

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Length: 37 pages
Date of creation: 24 Oct 2005
Date of revision:
Handle: RePEc:hhs:iuiwop:0646
Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
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  1. Assar Lindbeck & Sten Nyberg, 2006. "Raising Children to Work Hard: Altruism, Work Norms, and Social Insurance," The Quarterly Journal of Economics, MIT Press, vol. 121(4), pages 1473-1503, November.
  2. Becker, Sasha O & Ekholm, Karolina & Jackle, Robert & Muendler, Marc-Andreas, 2004. "Location Choices and Employment Decisions: A Comparison of German and Swedish Multinationals," University of California at San Diego, Economics Working Paper Series qt2fq490pd, Department of Economics, UC San Diego.
  3. Hesselius, Patrik & Johansson, Per & Larsson, Laura, 2005. "Monitoring sickness insurance claimants: evidence from a social experiment," Working Paper Series 2005:15, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  4. Browning, Martin & Hansen, Lars Peter & Heckman, James J., 1999. "Micro data and general equilibrium models," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 8, pages 543-633 Elsevier.
  5. Lindbeck, Assar & Persson, Mats, 2006. "A Model of Income Insurance and Social Norms," Working Paper Series 659, Research Institute of Industrial Economics.
  6. Martin, John P. & Grubb, David, 2001. "What works and for whom: a review of OECD countries' experiences with active labour market policies," Working Paper Series 2001:14, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  7. Dahlberg, M. & Forslund, A., 1999. "Direct Displacement Effects of Labour Market Programmes: the Case of Sweden," Papers 1999:22, Uppsala - Working Paper Series.
  8. Alesina, Alberto, et al, 1996. " Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
  9. Assar Lindbeck & Dirk Niepelt, 2005. "Improving the SGP: Taxes and Delegation rather than Fines," CESifo Working Paper Series 1389, CESifo Group Munich.
  10. Heckman, James J, 1993. "What Has Been Learned about Labor Supply in the Past Twenty Years?," American Economic Review, American Economic Association, vol. 83(2), pages 116-21, May.
  11. Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc.
  12. Alessandra Casella, 1999. "Tradable deficit permits:efficient implementation of the Stability Pact in the European Monetary Union," Economic Policy, CEPR;CES;MSH, vol. 14(29), pages 321-362, October.
  13. Assar Lindbeck & Sten Nyberg & Jšrgen W. Weibull, 1999. "Social Norms And Economic Incentives In The Welfare State," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 1-35, February.
  14. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  15. Lindbeck, Assar, 1995. "Hazardous Welfare-State Dynamics," Working Paper Series 428, Research Institute of Industrial Economics.
  16. Marin, Dalia, 2004. "'A Nation of Poets and Thinkers' - Less So with Eastern Enlargement? Austria and Germany," Discussion Papers in Economics 329, University of Munich, Department of Economics.
  17. Valkonen, Tarmo, 2002. "Demographic Uncertainty and Taxes," Discussion Papers 816, The Research Institute of the Finnish Economy.
  18. Hans-Werner Sinn, 1999. "Pension Reform and Demographic Crisis: Why a Funded System is Needed and why it is not Needed," CESifo Working Paper Series 195, CESifo Group Munich.
  19. Alan B. Krueger & Bruce D. Meyer, 2002. "Labor Supply Effects of Social Insurance," NBER Working Papers 9014, National Bureau of Economic Research, Inc.
  20. Baumol, William J. & Batey Blackman, Sue Anne & Wolff, Edward N., 1984. "Unbalanced Growth Revisited: Asymptotic Stagnancy and New Evidence," Working Papers 84-02, C.V. Starr Center for Applied Economics, New York University.
  21. Buchanan, James M., 1986. "The Constitution of Economic Policy," Nobel Prize in Economics documents 1986-1, Nobel Prize Committee.
  22. Lindbeck, Assar, 1982. "Tax Effects versus Budget Effects on Labor Supply," Economic Inquiry, Western Economic Association International, vol. 20(4), pages 473-89, October.
  23. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
  24. Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc.
  25. Jones, Ronald W. & Kierzkowski, Henryk, 2005. "International fragmentation and the new economic geography," The North American Journal of Economics and Finance, Elsevier, vol. 16(1), pages 1-10, March.
  26. Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers W98/18, Institute for Fiscal Studies.
  27. Skogman Thoursie, Peter, 2002. "Reporting Sick: Are Sporting Events Contagious?," Research Papers in Economics 2002:4, Stockholm University, Department of Economics.
  28. Roubini, Nouriel & Swagel, Phillip & Ozler, Sule & Alesina, Alberto, 1996. "Political Instability and Economic Growth," Scholarly Articles 4553024, Harvard University Department of Economics.
  29. Matthew J. Slaughter, 1999. "Globalisation and Wages: A Tale of Two Perspectives," The World Economy, Wiley Blackwell, vol. 22(5), pages 609-629, 07.
  30. Assar Lindbeck & Dennis J. Snower, 1989. "The Insider-Outsider Theory of Employment and Unemployment," MIT Press Books, The MIT Press, edition 1, volume 1, number 026262074x, June.
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