Is Life after the Welfare State Possible?
19 Pages Posted: 12 Aug 2016
Date Written: August 10, 2016
Recent macroeconomic trends primarily but not exclusively in Europe suggest that the welfare state is not conducive to growth and prosperity. European welfare-state economies have experienced a long-term decline in GDP growth, private consumption and domestic absorption; and a long-term increase in unemployment. Macroeconomic data suggest a correlation between the expansion of the welfare state and the decline in economic growth. Given that the welfare state is antithetical to growth and prosperity, is it possible to reform it away? This paper develops a framework for this question, identifying strict conditions under which welfare-state retrenchment or termination is possible.
Keywords: Welfare State, Economic Growth, Entitlements, Redistribution
JEL Classification: A13, E61, E64, H11, H19, I31, I38, N44, P40, P50, Z18
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