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Benefits conditional on work and the Nordic model

Benefits conditional on work and the Nordic model
Benefits conditional on work and the Nordic model
Welfare benefits in the Nordic countries are often tied to employment. We argue that this is one of the factors behind the success of the Nordic model, where a comprehensive welfare state is associated with high employment. In a general equilibrium setting, the underlining mechanism works through wage moderation and job creation. The benefits make it more important to hold a job, thus lower wages will be accepted, and more jobs created. Moreover, we show that the incentive to acquire higher education improves, further boosting employment in the long run. These positive effects help in counteracting the negative impact of taxation.

Through numerical simulations, we show how this mechanism can contribute to explain the better labor market performance and more equitable income distribution of Nordic countries compared to Continental European ones.
Tonin, Mirco
2929ca00-ca4e-4eb3-bf2b-a5d233b80253
Kolm, Ann-Sofie
aa8fdd2e-e7d8-4b0f-8b9b-b90addd9ddaf
Tonin, Mirco
2929ca00-ca4e-4eb3-bf2b-a5d233b80253
Kolm, Ann-Sofie
aa8fdd2e-e7d8-4b0f-8b9b-b90addd9ddaf

Tonin, Mirco and Kolm, Ann-Sofie (2014) Benefits conditional on work and the Nordic model. Journal of Public Economics. (doi:10.1016/j.jpubeco.2014.05.010).

Record type: Article

Abstract

Welfare benefits in the Nordic countries are often tied to employment. We argue that this is one of the factors behind the success of the Nordic model, where a comprehensive welfare state is associated with high employment. In a general equilibrium setting, the underlining mechanism works through wage moderation and job creation. The benefits make it more important to hold a job, thus lower wages will be accepted, and more jobs created. Moreover, we show that the incentive to acquire higher education improves, further boosting employment in the long run. These positive effects help in counteracting the negative impact of taxation.

Through numerical simulations, we show how this mechanism can contribute to explain the better labor market performance and more equitable income distribution of Nordic countries compared to Continental European ones.

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Published date: 17 June 2014
Organisations: Economics

Identifiers

Local EPrints ID: 369707
URI: http://eprints.soton.ac.uk/id/eprint/369707
PURE UUID: fd83c674-dac1-479a-8273-7d6183ce1437

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Date deposited: 13 Oct 2014 10:16
Last modified: 14 Mar 2024 18:08

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Contributors

Author: Mirco Tonin
Author: Ann-Sofie Kolm

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