Working Paper: CEPR ID: DP3479
Authors: Stefan Flöster; Robert Gidehag; Mike Orszag; Dennis Snower
Abstract: The paper examines the possible effects of introducing a large-scale welfare reform in Sweden, namely, the introduction of comprehensive welfare accounts. Under this policy, individuals make mandatory contributions to accounts, which they can top up with voluntary contributions. In return, individuals? welfare benefits are paid from their accounts. The paper uses a large panel of individual income data to examine how the adoption of universal welfare accounts may affect economic activity. We find that this policy could be designed so as to reduce social insurance expenditure considerably, improve the incentives to work and save, all with relatively small redistributive impact.
Keywords: social insurance; taxes; welfare accounts; welfare reform; welfare state benefits
JEL Codes: H11; H21; H23; H51; H52; H53; H55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| introduction of welfare accounts (I38) | reduction in social insurance expenditure (H55) |
| introduction of welfare accounts (I38) | improvement in work and saving incentives (E69) |
| improvement in work and saving incentives (E69) | improvement in overall economic activity (O51) |
| introduction of welfare accounts (I38) | significant tax reductions (H29) |
| introduction of welfare accounts (I38) | increases in after-tax incomes (H29) |