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Sustainable Social Spending

42 Pages Posted: 5 Dec 2005  

Assar Lindbeck

; CESifo (Center for Economic Studies and Ifo Institute); Research Institute of Industrial Economics (IFN)

Date Written: November 2005

Abstract

The paper discusses a number of threats to the financial sustainability of social spending: increased internationalization of national economies, gradually higher relative costs of producing a number of human services, the "graying" of the population, slower productivity growth in the private sector, low employment rates, and various types of disincentive effects related to the welfare state itself, including moral hazard. I argue that threats from gradually rising costs of providing human services and disincentive effects of welfare-state arrangements, in particular moral hazard and benefit dependency, are more difficult to deal with than the other threats. I also discuss the choice between ad hoc policy reforms and automatic adjustment mechanisms, delegated to administrative bodies, for dealing with these threats.

Keywords: sustainable fiscal policy, Baumol's disease, moral hazard, automatic adjustment mechanisms

JEL Classification: E62, H31, H53

Suggested Citation

Lindbeck, Assar, Sustainable Social Spending (November 2005). CESifo Working Paper No. 1594. Available at SSRN: https://ssrn.com/abstract=863524

Assar Lindbeck (Contact Author)

( email )

Stockholm, SE-10691
Sweden
+46 8 163 078 (Phone)
+46 8 162 946 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se/assarl

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