IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpma/0203001.html
   My bibliography  Save this paper

The Efficiency-Equality Tradeoff in Welfare State Economies

Author

Listed:
  • Radim Bohacek

    (CERGE-EI)

Abstract

This paper studies the effects of different levels of social insurance on efficiency and distribution of resources in a general equilibrium model of a closed economy with heterogeneous agents and moral hazard. I compare optimal allocations of capital, labor supply, and consumption in stationary recursive equilibria for economies with different guaranteed minimum consumption levels (social insurance). I show that the efficiency-equality tradeoff associated with welfare state economies does not hold. Efficiency decreases and equality rises as the minimal guaranteed consumption increases from zero to around one third of the average consumption. However, if social insurance expands even further, the efficiency loss becomes very high and equality worsens. Average welfare is greater in economies with high social insurance while the median agent is better off in economies with low social insurance. Finally, I study the transitions between welfare regimes' steady states to evaluate the effects of social insurance reforms.

Suggested Citation

  • Radim Bohacek, 2002. "The Efficiency-Equality Tradeoff in Welfare State Economies," Macroeconomics 0203001, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpma:0203001
    Note: Type of Document - Acrobat PDF; pages: 30 ; figures: included
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0203/0203001.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Radim Bohacek, 2000. "Capital Accumulation in an Economy with Heterogeneous Agents and Moral Hazard," CERGE-EI Working Papers wp165, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    2. Radim Bohacek, 2001. "Capital Accumulation And Moral Hazard In An Economy With Heterogeneous Agents," CeNDEF Workshop Papers, January 2001 1B.2, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.

    More about this item

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:0203001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.