Why the Welfare State Looks Like a Free Lunch

No 9869, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The econometric consensus on the effects of social spending confirms a puzzle we confront in the raw data: There is no clear net GDP cost of high tax-based social spending on GDP, despite a tradition of assuming that such costs are large. The paper offers five keys to this free lunch puzzle. First, the costly forms of transfers usually imagined have not been practiced by real-world welfare states. Second, better tests confirm that the usually imagined costs would be felt only if policy had strayed out of sample, away from any actual historical experience. Third, the tax strategies of high-budget welfare states are more pro-growth and less progressive than has been realized. Fourth, the work disincentives of social transfers are so designed as to shield GDP from much reduction if any. Finally, we return to some positive growth and well-being benefits of the high social transfers, and suggest how democratic cost control relates to budget size.

JEL-codes: H0 N4 (search for similar items in EconPapers)
Date: 2003-07
New Economics Papers: this item is included in nep-pbe
Note: DAE
References: Add references at CitEc
Citations: View citations in EconPapers (41)

Downloads: (external link)
http://www.nber.org/papers/w9869.pdf (application/pdf)

Related works:
Working Paper: Why The Welfare State Looks Like a Free Lunch (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:9869

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w9869

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().