The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Welfare State

  • Assar Lindbeck
Reference work entry


This article starts out with a brief discussion of the historical background, the justifications and the political forces behind the creation of the modern welfare state. It also summarizes its major achievements in terms of economic efficiency and redistribution. The article also tries to identify some major problems of contemporary welfare-state arrangements, distinguishing problems caused by exogenous shocks from those related to endogenous behaviour adjustments by individuals to the welfare state itself. The latter include tax distortions, moral hazard, and endogenous changes in social norms concerning work and benefit dependency.


Advantageous selection Adverse selection Aging and retirement Altruism Baumol, W. Birth rates Child care Civil society Dependency Direct provision vs subsidy Distribution of income Early retirement pensions Education Employment subsidies Enlightened self-interest Family Free riding Gini coefficient Globalization Health care Human capital investment Human services Immigration Income effects Income insurance Income smoothing Individualization Industrialization Intergenerational contracting Intergenerational transfers International trade (theory) Intra-individual redistribution Job-security legislation Labour supply Labour-Intensive human services Labour-Market programmes Leisure Luxembourg Income Study Marginal tax rates Market failure Moral hazard Myopia Non-governmental organizations Non-profit organizations Old-age care Political economy of income redistribution Preschooling Productivity growth Public social spending Redistribution of income and wealth Retraining Risk sharing Sickness benefits Social insurance Social norms Structural change Structural unemployment Substitution effect Sweden Tax base Tax competition Tax distortions Tax wedge Transfer payments Unemployment benefits Universal vs. targeted transfers Urbanization User fees Voucher systems Welfare state Working poor 

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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Assar Lindbeck
    • 1
  1. 1.