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The Threat to the German Welfare State

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  • Hans-Werner Sinn

Abstract

Germany is in a dilemma. Low wage competition via product and factor markets increases the demands on the welfare state, but increased systems competition in the context of international factor mobility reduces the possibilities of maintaining it. The welfare state has important allocative functions. It is an insurance against career risks and it stimulates risk taking and economic growth. However, it also has severe moral hazard effects by reducing work incentives. To help the welfare state survive and improve its performance, the paper advocates the home country principle for the treatment of immigrants, the introduction of funded elements in the pension system, and employment subsidies at the expense of ordinary welfare payments.

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  • Hans-Werner Sinn, 2000. "The Threat to the German Welfare State," CESifo Working Paper Series 320, CESifo.
    • Handle: RePEc:ces:ceswps:_320
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    References listed on IDEAS

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    1. Sinn, Hans-Werner, 1990. "Tax harmonization and tax competition in Europe," European Economic Review, Elsevier, vol. 34(2-3), pages 489-504, May.
    2. Edward J. Bird, "undated". "Does the Welfare State Induce Risk Taking?," Wallis Working Papers WP11, University of Rochester - Wallis Institute of Political Economy.
    3. Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1335-1357, July.
    4. Hans-Werner Sinn, 1996. "Social insurance, incentives and risk taking," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(3), pages 259-280, July.
    5. Nickell, Stephen J & Symons, James, 1990. "The Real Wage-Employment Relationship in the United States," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages 1-15, January.
    6. Burgess, Simon M, 1988. "Employment Adjustment in UK Manufacturing," Economic Journal, Royal Economic Society, vol. 98(389), pages 81-103, March.
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    Cited by:

    1. Adam, Antonis & Moutos, Thomas, 2011. "A politico-economic analysis of minimum wages and wage subsidies," Economics Letters, Elsevier, vol. 110(3), pages 171-173, March.
    2. Wagner, Ulrich & Volkert, Jürgen, 2002. "Beschäftigungshemmende Reformstaus in der Bundesrepublik Deutschland und wie man sie auflösen könnte / Flexibilisierung durch Kombi-Einkommen? Die Perspektive der Neuen Politischen Ökonomie," Beiträge der Hochschule Pforzheim 102, Pforzheim University.
    3. Giancarlo Corsetti & John Flemming & Seppo Honkapohja & Willi Leibfritz & Gilles Saint-Paul & Hans-Werner Sinn & Xavier Vives, 2002. "Welfare to Work," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 71-86, 04.
      • Giancarlo Corsetti & John Flemming & Seppo Honkapohja & Willi Leibfritz & Gilles Saint-Paul & Hans-Werner Sinn & Xavier Vives, 2002. "Welfare to Work," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 2002(CESIFOFOR), pages 71-86, 04.
    4. Laura Chadwick & Jürgen Volkert, 2003. "Making Work Pay: U.S. American models for a German context?," IAW Discussion Papers 08, Institut für Angewandte Wirtschaftsforschung (IAW).
    5. Lindbeck, Assar, 2003. "Improving the Performance of the European Social Model - The Welfare State over the Life Cycle," Seminar Papers 717, Stockholm University, Institute for International Economic Studies.
    6. Rüdiger Waldkirch & Matthias Meyer & Karl Homann, 2009. "Accounting for the Benefits of Social Security and the Role of Business: Four Ideal Types and Their Different Heuristics," Journal of Business Ethics, Springer, vol. 89(3), pages 247-267, November.
    7. George Economides & Thomas Moutos, 2014. "Minimum Wages as a Redistributive Device in the Long Run," CESifo Working Paper Series 5052, CESifo.
    8. Seppo Honkapohja & Frank Westermann, 2009. "Welfare to Work," Palgrave Macmillan Books, in: Seppo Honkapohja & Frank Westermann (ed.), Designing the European Model, chapter 1, pages 35-60, Palgrave Macmillan.

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