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Distribution and labour market incentives in the welfare state – Danish experiences

Author

Listed:
  • Andersen, Torben M.

    (School of Economics and Management, University of Aarhus)

  • Haagen Pedersen, Lars

    (Danish Economic Councils)

Abstract

In recent years, Denmark has been successful in ensuring and maintaining a low unemployment rate. However, almost one third of the working-age population remains dependent on public transfers, a fact which poses questions on both social inclusion and financial pressures on the welfare state. In this paper, we consider more closely the interaction between the social safety net and the need and scope for maintaining a high employment rate in a welfare state of the Scandinavian type. The focus is on the basic dilemma between ambitious distributional goals on the one hand and work incentives on the other. The paper discusses policy issues related to minimizing welfare dependence that improve the transition from welfare to work. We consider these issues in a life cycle perspective considering entry into the labour market, maintenance of labour market contact, and exit from the labour market. Finally, we consider some recent reform proposals and initiatives in Denmark.

Suggested Citation

  • Andersen, Torben M. & Haagen Pedersen, Lars, 2008. "Distribution and labour market incentives in the welfare state – Danish experiences," Working Paper Series 2008:10, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    • Handle: RePEc:hhs:ifauwp:2008_010
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    References listed on IDEAS

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    1. Jan Boone & Peter Fredriksson & Bertil Holmlund & Jan C. van Ours, 2007. "Optimal Unemployment Insurance with Monitoring and Sanctions," Economic Journal, Royal Economic Society, vol. 117(518), pages 399-421, March.
    2. Caroline Hall & Laura Hartman, 2010. "Moral hazard among the sick and unemployed: evidence from a Swedish social insurance reform," Empirical Economics, Springer, vol. 39(1), pages 27-50, August.
    3. Jensen, Peter & Rosholm, Michael & Svarer, Michael, 2003. "The response of youth unemployment to benefits, incentives, and sanctions," European Journal of Political Economy, Elsevier, vol. 19(2), pages 301-316, June.
    4. Laura Larsson, 2006. "Sick of Being Unemployed? Interactions between Unemployment and Sickness Insurance," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(1), pages 97-113, March.
    5. Larsson, Laura, 2004. "Harmonizing unemployment and sickness insurance: Why (not)?," Working Paper Series 2004:8, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    6. Mike Brewer, 2007. "Welfare reform in the UK: 1997 - 2007," IFS Working Papers W07/20, Institute for Fiscal Studies.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Incentives to work; Social safety net; Distribution;
    All these keywords.

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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