Welfare state and social Europe

Trust and the welfare state: The twin-peaked curve

Yann Algan, Pierre Cahuc, Marc Sangnier, 17 July 2014

It is commonly argued that the persistence of large welfare states in Scandinavian countries is due to the trustworthiness of their citizens. This column shows that the relationship between trust and the size of the welfare state is twin peaked. Untrustworthy individuals support generous welfare states because they expect to benefit without bearing the costs, whereas civic-minded individuals only support generous welfare states when surrounded by people they trust.

The source of population ageing matters: Longevity versus fertility

Harun Onder, Pierre Pestieau, 20 May 2014

The world’s population is ageing, due to both increasing longevity and decreasing fertility. This column shows that the net effect of ageing on capital accumulation (and therefore growth) depends on which of these two factors dominates, and also on the structure of the pension system. Under a pension system with defined contributions, a reduction in fertility induces adjustments in savings and working life that unambiguously increase capital per worker.

EZ fiscal shock absorber: Lessons from insurance economics

Daniel Gros, 19 March 2014

Since the onset of the sovereign debt crisis, the argument for a system of fiscal transfers to offset idiosyncratic shocks in the Eurozone has gained adherents. This column argues that what the Eurozone really needs is not a system which offsets all shocks by some small fraction, but a system which protects against shocks which are rare, but potentially catastrophic. A system of fiscal insurance with a fixed deductible would therefore be preferable to a fiscal shock absorber that offsets a certain percentage of all fiscal shocks.

Immigration from Romania and Bulgaria: The fiscal impact

Joakim Ruist, 18 January 2014

The lifting of transitional access restrictions for Romanian and Bulgarian workers is a hotly debated topic in the EU with big implications for public finances in destination countries. This column presents analysis of immigrants in Sweden, which never imposed access restrictions when these two countries joined the EU. Romanian and Bulgarian migrants to Sweden under this unrestricted regime make a sizeable positive contribution to Swedish public finances. Contributions can be expected to be even larger in the UK and Ireland.

The sustainability factor in Spanish pensions

Rafael Doménech, Víctor Pérez-Díaz, 11 December 2013

Based on the report issued by a Committee of Experts, the Spanish Parliament will pass a new law that implements an innovative sustainability factor in the public pension system. This column argues that the proposal solves the problem of financial sustainability in the long run while opening a wider debate on the welfare system and growth under conditions of increased global competition.

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