IDEAS home Printed from https://ideas.repec.org/p/sce/scecf1/90.html
   My bibliography  Save this paper

Efficiency and Equality in a Welfare State Economy

Author

Listed:
  • Radim Bohacek

Abstract

This paper studies the effects of social insurance policies on the level and distribution of welfare and resources in a general equilibrium model of a closed economy with a continuum of agents and moral hazard. In order to simulate the welfare-state tradeoff between efficiency and equality, I characterize and compare efficient allocations and invariant distributions of utility entitlements, capital, labor supply, and consumption in stationary recursive equilibria for economic regimes with different guaranteed minimum consumption levels (welfare-state regimes). First, I describe a general way how to introduce capital accumulation into models with heterogeneous agents with private information and show that private information lowers the equilibrium interest rate below agents' discount rate. Second, increasing level of social insurance (welfare state) leads to inefficient allocation of resources and lower productivity. Third, higher level of social insurance delivers greater equality as well as greater expected utility of the agents. These results constitute the tradeoff between efficiency and equality in a welfare state economy.

Suggested Citation

  • Radim Bohacek, 2001. "Efficiency and Equality in a Welfare State Economy," Computing in Economics and Finance 2001 90, Society for Computational Economics.
    • Handle: RePEc:sce:scecf1:90
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    Keywords

    Efficiency; equality; heterogeneous agents; welfare;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sce:scecf1:90. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christopher F. Baum (email available below). General contact details of provider: https://edirc.repec.org/data/sceeeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.