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Welfare regimes and the incentives to work and get educated

  • Andrés Rodríguez-Pose

    ()

    (IMDEA Social Sciences Institute)

  • Vassilis Tselios

    ()

    (University of Newcastle upon Tyne)

This paper examines whether differences in welfare regimes shape the incentives to work and get educated. Using microeconomic data for more than 100,000 European individuals, the results show that welfare regimes make a difference for wages and education. First, people- and household-based effects (internal returns to education and household wage and education externalities) generate socioeconomic incentives for people to get an education and work, which are stronger in countries with the weakest welfare systems, i.e. those with what is known as 'Residual' welfare regimes (Greece, Italy, Spain and Portugal). Second, place-based effects, and more specifically differences in regional wage per capita and educational endowment and in regional interpersonal income and educational inequality, also influence wages and education in different ways across welfare regimes. Place-based effects have the greatest incidence in the Nordic Social-Democratic welfare systems. These results are robust to the inclusion of a large number of people- and place-based controls.

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Paper provided by Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales in its series Working Papers with number 2011-01.

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Date of creation: 05 Jan 2011
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Publication status: Published in Environment and Planning A 44(1), January 2012: 125-149
Handle: RePEc:imd:wpaper:wp2011-01
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  1. Lindbeck, Assar, 1995. "Hazardous Welfare-State Dynamics," American Economic Review, American Economic Association, vol. 85(2), pages 9-15, May.
  2. Elster, Jon, 1989. "Social Norms and Economic Theory," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 99-117, Fall.
  3. Andrés Rodríguez-Pose & Vassilis Tselios, 2007. "Education and income inequality in the regions of the European Union," Working Papers 2007-17, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  4. Heinemann, Friedrich, 2007. "Is the Welfare State Self-destructive? A Study of Government Benefit Morale," ZEW Discussion Papers 07-029, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Giuseppe Bertola, 1991. "Factor Shares and Savings in Endogenous Growth," NBER Working Papers 3851, National Bureau of Economic Research, Inc.
  6. Andrés Rodríguez-Pose & Montserrat Vilalta-Bufí, 2005. "Education, migration, and job satisfaction: the regional returns of human capital in the EU," Journal of Economic Geography, Oxford University Press, vol. 5(5), pages 545-566, October.
  7. Francesca Bettio & Janneke Plantenga, 2004. "Comparing Care Regimes In Europe," Feminist Economics, Taylor & Francis Journals, vol. 10(1), pages 85-113.
  8. Colm Harmon & Hessel Oosterbeek & Ian Walker, 2003. "The Returns to Education: Microeconomics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 115-156, 04.
  9. Andrés Rodríguez-Pose & Vassilis Tselios, 2009. "Individual earnings and educational externalities in the European Union," Working Papers 2009-07, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  10. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  11. Andrés Rodríguez-Pose & Vassilis Tselios, 2010. "Returns to Migration, Education, and Externalities in the European Union," Working Papers 2010.25, Fondazione Eni Enrico Mattei.
  12. Timothy J. Bartik, . "Spillover Effects of Welfare Reforms in State Labor Markets," Upjohn Working Papers and Journal Articles tjb2002jrs, W.E. Upjohn Institute for Employment Research.
  13. MION, Giordano & NATICCHIONI, Paolo, 2006. "The spatial sorting and matching of skills and firms," CORE Discussion Papers 2006099, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. Sonya Kostova Huffman & Maureen Kilkenny, 2007. "Regional welfare program and labour force participation," Papers in Regional Science, Wiley Blackwell, vol. 86(2), pages 215-239, 06.
  15. David R. Howell & Miriam Rehm, 2009. "Unemployment Compensation and High European Unemployment: A Reassessment with New Benefit Indicators," Working Papers wp201, Political Economy Research Institute, University of Massachusetts at Amherst.
  16. Saint-Paul, Gilles & Verdier, Thierry, 1993. "Education, democracy and growth," Journal of Development Economics, Elsevier, vol. 42(2), pages 399-407, December.
  17. Esping-Andersen, Gosta, 1999. "Social Foundations of Postindustrial Economies," OUP Catalogue, Oxford University Press, number 9780198742005, March.
  18. Bas Jacobs, 2009. "Is Prescott right? Welfare state policies and the incentives to work, learn, and retire," International Tax and Public Finance, Springer, vol. 16(2), pages 253-280, April.
  19. Andrés Rodríguez-Pose & Vassilis Tselios, 2010. "Inequalities in income and education and regional economic growth in western Europe," The Annals of Regional Science, Springer, vol. 44(2), pages 349-375, April.
  20. Vassilis Tselios, 2008. "Income and educational inequalities in the regions of the European Union: Geographical spillovers under welfare state restrictions," Papers in Regional Science, Wiley Blackwell, vol. 87(3), pages 403-430, 08.
  21. Andrés Rodríguez-Pose & Vassilis Tselios, 2007. "Mapping the European regional educational distribution: Educational attainment and inequality," Working Papers 2007-18, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  22. Alexandra Rillaers, 2001. "Education and income inequality: The role of a social protection system," Journal of Population Economics, Springer, vol. 14(3), pages 425-443.
  23. Chris Hamnett, 2009. "Spatial Divisions of Welfare: The Geography of Welfare Benefit Expenditure and of Housing Benefit in Britain," Regional Studies, Taylor & Francis Journals, vol. 43(8), pages 1015-1033.
  24. Ronald Schettkat, 2003. "Are institutional rigidities at the root of European unemployment?," Cambridge Journal of Economics, Oxford University Press, vol. 27(6), pages 771-787, November.
  25. Barbara Sianesi & John Van Reenen, 2003. "The Returns to Education: Macroeconomics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 157-200, 04.
  26. Green, Colin & Kler, Parvinder & Leeves, Gareth, 2007. "Immigrant overeducation: Evidence from recent arrivals to Australia," Economics of Education Review, Elsevier, vol. 26(4), pages 420-432, August.
  27. Riccardo Crescenzi & Andrés Rodríguez-Pose & Michael Storper, 2007. "The territorial dynamics of innovation: a Europe-United States comparative analysis," LSE Research Online Documents on Economics 23328, London School of Economics and Political Science, LSE Library.
  28. Kirby, Simon & Riley, Rebecca, 2008. "The external returns to education: UK evidence using repeated cross-sections," Labour Economics, Elsevier, vol. 15(4), pages 619-630, August.
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