China’s reformed economy

Wirtschaftsreform, Wirtschaftspolitik, Politische Reform, China, Economic reform, Economic policy, Political reform

Incentives and Social Norms in Household Behavior

In a broad psychological perspective, both economic incentives and social norms may be be regarded as giving rise to purposesful, or “rational” behavior. By this I simply mean that individuals act in accordance with expected reward or punishment, even though the form these take differs substantially in the two cases. Whereas economic incentives imply “material rewards”, or favors that can be traded for such rewards including leisure, social norms imply “social rewards”. The latter basically take the form of approval or disapproval from others, and related feelings of pride or shame. Moreover, once a social norm has been internalized in an individual’s own value system, behavior in accordance with, or against, the norm will also result in feelings of self-respect or guilt. All this suggests that not only economic incentives but also social norms may be analyzed by means of utility theory, as will be illustrated below. Many social norms may not have much to do with economic incentives (Elster,1989). In some cases, it is, however, useful to study the interaction between them. Indeed, this is the basic message of the paper. My discussion will be limited to three norms of apparent importance for household behavior: (i) work norms; (ii) norms against wage underbidding; and (iii) saving and consumption norms. Thus, the paper deals with norms concerning willingness to work, ability to get a job and the use of income.Social Norms; Incentives; Employment; Saving; Consumption

Incentives in the Welfare State

This paper deals with economic incentives and welfare-state arrangements in OECD countries; it also offers some lessons for would-be welfare states. These arrangements differ, of course, among OECD countries. In particular, there is wide variation in the extent to which countries rely on four basic institutions - the state, the firm, the family and the market. Countries also differ in their reliance on (i) a common safety net, often in the form of flat-rate benefits tied to specific contingencies; (ii) means-tested benefits for low-income groups; and (iii) income protection, i.e., benefits that are tied to previous income. Another distinction is between corporatist welfare states, where benefits are tied to labor contracts, and universal welfare states in which benefits are conditional on residence or citizenship. This distinction is blurred, however, by recent tendencies in corporatist welfare states to extend coverage to individuals who have very weak attachment to the labor market, and in universal welfare states to tie benefits to previous or contemporary work under the slogan “workfare” rather than “welfare”.economic incentives; welfare-state arrangements

Changing Tides for the Welfare State - An Essay

Recent developments in society have generated misalignment between the welfare state and socio-economic conditions and preferences. This paper emphasis developments in the labor market and the structure, stability and preferences of the family, as well as macroeconomic changes. The latter include new patterns of short-term macroeconomic instability, economic growth and the internationalization of national economies. I deal both with developments that are exogenous from the point of view of the welfare state and with developments that may be regarded as endogenous behavior adjustments of individuals in response to the welfare state itself. Alternative welfare-state reforms are also considered.Welfare State; Changes in labor market; Changes in family

An Essay on Welfare State Dynamics

The expansion of welfare-state arrangements is seen as the result of dynamic interaction between market behaviour and political behaviour, often with considerable time lags, sometimes generating either virtuous or vicious circles. Such interaction may also involve induced (endogenous) changes in social norms and political pre­ferences. Moreover, the internationalisation process not only limits the ability of national governments to redistribute income; they also increase the political demands for international mobility of welfare-state benefits and social services. I also discuss the dynamics of reforms and retreats of welfare-state arrangements.Welfare State; Welfare-State Dynamics; Political Equilibrium; Social Norms

An Essay on Welfare State Dynamics

The expansion of welfare-state arrangements is seen as the result of dynamic interaction between market behaviour and political behaviour, often with considerable time lags, sometimes generating either virtuous or vicious circles. Such interaction may also involve induced (endogenous) changes in social norms and political preferences. Moreover, the internationalisation process not only limits the ability of national governments to redistribute income; they also increase the political demands for international mobility of welfare-state benefits and social services. I also discuss the dynamics of reforms and retreats of welfare-state arrangements.welfare state; welfare-state dynamics; political equilibrium; social norms

Improving the Performance of the European Social Model - The Welfare State over the Life Cycle

The achievements of social-welfare arrangements in Western Europe are well known: considerable income security, relatively little poverty and, in some countries, ample supply of social services. But there are also well-known weaknesses and hence considerable scope for improvement. Three types of weaknesses are considered in this paper: social-welfare arrangements are often not financially robust to shocks; individuals make undesirable behavioural adjustments in response to welfare-state arrangements and their financing; and social-welfare arrangements are often poorly adapted to recent changes in socio-economic conditions and preferences of individuals. I discuss these weaknesses, and alternative methods to mitigate them, in the context of various types of welfare-state arrangements that the individual may encounter over the life cycle.social policies; welfare state; labour market; family structure; preferences

Sustainable Social Spending

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.sustainable fiscal policy, Baumol’s disease, moral hazard, automatic adjustment mechanisms

An Essay on Welfare State Dynamics

The expansion of welfare-state arrangements is seen as the result of dynamic interaction between market behaviour and political behaviour, often with considerable time lags, sometimes generating either virtuous or vicious circles. Such interaction may also involve induced (endogenous) changes in social norms and political preferences. Moreover, the internationalisation process not only limits the ability of national governments to redistribute income; they also increase the political demands for international mobility of welfare-state benefits and social services. I also discuss the dynamics of reforms and retreats of welfare-state arrangements.welfare state, welfare-state dynamics, political equilibrium, social norms