Harmonizing Social Welfare and Economic Growth: Case Studies of European Countries and Implications for Korea

9 Pages Posted: 29 Aug 2014

See all articles by Yoo-Duk Kang

Yoo-Duk Kang

Korea Institute for International Economic Policy

Cheol-Won Lee

Korea Institute for International Economic Policy

Tae Hyun Oh

Korea Institute for International Economic Policy

Hyun Jean Lee

Korea Institute for International Economic Policy

Junyup Kim

Independent

Date Written: May 16, 2014

Abstract

Welfare spending continues to garner a bigger chunk of the national budget in Korea. This has become a key economic issue attracting much public attention. Fiscal conservatives call for tighter controls on welfare spending, while some are calling for greater welfare spending in order to temper the effects of economic polarization.

In this context, this paper analyzes relation between level of welfare spending and economic growth and proposes some conditions to create welfare system in favor of economic growth. Beyond quantitative analyses, the paper reviews reforms in welfare policy in Sweden, Denmark, Germany and Netherlands in order to understand how these countries have reacted to domestic and external challenges in their welfare system.

Through economic analysis and case studies, the paper draws following policy implications for Korea. First, it is necessary to maximize existing welfare policy, but also develop ways to raise taxes in a growth-friendly manner. Second, it is highly recommended to create an atmosphere conducive to policy innovation. Third, it is necessary to establish growth-oriented welfare regimes with a special focus on strengthening human capital and employment rates.

Keywords: Social Welfare, Economic Growth, Social Expenditure, Welfare reform, Europe

Suggested Citation

Kang, Yoo-Duk and Lee, Cheol-Won and Oh, Tae Hyun and Lee, Hyun Jean and Kim, Junyup, Harmonizing Social Welfare and Economic Growth: Case Studies of European Countries and Implications for Korea (May 16, 2014). KIEP Research Paper No. World Economic Update 14-19. Available at SSRN: https://ssrn.com/abstract=2488317 or http://dx.doi.org/10.2139/ssrn.2488317

Yoo-Duk Kang (Contact Author)

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Cheol-Won Lee

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Tae Hyun Oh

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Hyun Jean Lee

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Junyup Kim

Independent

No Address Available

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