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An Empirical Analysis of the Dynamics of the Welfare State: The Case of Benefit Morale

  • Martin Halla
  • Mario Lackner
  • Friedrich G. Schneider

Does the supply of a welfare state create its own demand? Many economic scholars studying welfare arrangements refer to Say’s law and insinuate a self-destructive welfare state. However, little is known about the empirical validity of these assumptions and hypotheses. We study the dynamic effect of different welfare arrangements on benefit fraud. In particular, we analyze the impact of the welfare state on the respective social norm, i. e. benefit morale. It turns out that a high level of public social expenditures and a high unemployment rate are associated with a small positive (or no) immediate impact on benefit morale, which however is crowded out by adverse medium and long run effects.

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Paper provided by The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria in its series NRN working papers with number 2009-04.

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Length: 28 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:jku:nrnwps:2009_04
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NRN Labor Economics and the Welfare State, c/o Rudolf Winter-Ebmer, Altenbergerstr. 69, 4040 Linz

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