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In-Work Benefits and the Nordic Model

Author

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  • Kolm, Ann-Sofie

    () (Dept. of Economics, Stockholm University)

  • Tonin, Mirco

    () (University of Southampton (and Central European University, Budapest; IZA, Bonn))

Abstract

Welfare benefits in the Nordic countries are often tied to employment. We argue that this is one of the factors behind the success of the Nordic model, where a comprehensive welfare state is associated with high employment. In a general equilibrium setting, the underlining mechanism works through wage moderation and job creation. The benefits make it more important to hold a job, thus lower wages will be accepted, and more jobs created. Moreover, we show that the incentive to acquire higher education improves, further boosting employment in the long run. These positive effects help counteracting the negative impact of taxation.

Suggested Citation

  • Kolm, Ann-Sofie & Tonin, Mirco, 2013. "In-Work Benefits and the Nordic Model," Research Papers in Economics 2013:1, Stockholm University, Department of Economics.
    • Handle: RePEc:hhs:sunrpe:2013_0001
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    Cited by:

    1. Günther Schmid, 2015. "Sharing Risks of Labour Market Transitions: Towards a System of Employment Insurance," British Journal of Industrial Relations, London School of Economics, vol. 53(1), pages 70-93, March.

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    More about this item

    Keywords

    Nordic model; in-work benefits; wage adjustment; unemployment; education; skill formation; earnings;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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