Comment on Lars Söderström “Moral Hazard in the Welfare State”
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The theme of Lars Söderström’s paper is to what extent moral hazard problems limit the amount of social insurance that can be provided in the welfare state. This is a very important and timely topic. I see two main motivations why we should devote interest to it now.
The first motivation is that incentive effects of social insurance are likely to take a long time to develop before they reach their full impact (see, e.g., Lindbeck, 1995). As noted in the paper, it is a question of developing social norms. For this reason, it may be first now that we really start to observe the adverse behavioral effects of the welfare systems that were introduced in most Western European countries after the Second World War.
KeywordsWelfare State Unemployment Insurance Western European Country Incentive Effect Reservation Wage
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