Is the Welfare State Mortal or Exportable?
by Peter H. Lindert. Reading for week of May 17, 2005. The welfare state is not an endangered species among the industrialized OECD countries. There is no race to the bottom. OECD experience since 1980 does not show any negative effect of larger tax-financed transfers on national product. There are good reasons for this free lunch puzzle. High-budget welfare states feature a tax mix that is more pro-growth than the tax mixes of low-budget America, Japan, and Switzerland. The high-budget states also have more efficient health care, better support for child care and womens careers, and other features that mitigate the negative incentives on transfer recipients. Experience from the 1980s and 1990s suggests how population aging and the pension crisis will affect government budgets in this century. The countries with the oldest populations had already begun to cut the relative generosity of their transfers to the elderly per elderly person. They did not, however, cut real benefits or the sh
