The enfranchisement of women and the welfare state

We offer a rationale for the decision to extend the franchise to women within a politico-economic model where men are richer than women, women display a higher preference for public goods, and women's disenfranchisement carries a societal cost. Men and women are matched within households which are the center of the decision process. We derive the optimal tax rate under two alternative regimes: a males-only enfranchisement regime and a universal enfranchisement regime. The latter is associated with a higher tax rate but, as industrialization raises the reward to intellectual labor relative to physical labor, women's relative wage increases, thus decreasing the difference between the tax rates. When the cost of disenfranchisement becomes higher than the cost of the higher tax rate which applies under universal enfranchisement, the male median voter is better off extending the franchise to women. A consequent expansion of the size of government is only to be expected in societies with a relatively high cost of disenfranchisement.We empirically test the implications of the model over the 1870–1930 period. We proxy the gender wage gap with the level of per capita income and the cost of disenfranchisement with the presence of catholicism, which is associated with a more traditional view of women's role and thus a lower cost. The gender gap in the preferences for public goods is proxied by the availability of divorce, which implies marital instability and a more vulnerable economic position for women. Consistently with the model's predictions, women's suffrage is correlated positively with per capita income and negatively with the presence of catholicism and the availability of divorce, while women's suffrage increases the size of government only in non-catholic countries.     

The generosity of the welfare state towards the elderly

This paper distinguishes among three types of generosity of social security systems: average generosity, generosity towards early retirement and generosity towards the poor. On the basis of theoretical predictions, it examines the statistical correlations among those types of generosity for 14 OECD countries over the period 1985–2000. It also shows how they have evolved over time and tries to relate this evolution to the process of economic integration. There are three main findings, the first one being a positive relation between average social security spending and poverty alleviation. There is the negative relation between average spending and inequality reduction. Finally, over the period 1985–1995 one sees that poverty alleviation increases on average, but to a degree that decreases with economic openness.     

Incorporating affirmative action into the welfare state

In this paper, we discuss a novel aspect of affirmative action policy. We examine its redistributive role, asking whether in an egalitarian society, supplementing the tax-transfer system with an affirmative action policy would enhance social welfare. We demonstrate that affirmative action could be a desirable policy tool even if racial discrimination does not exist in the labor market.     

The modern welfare state: Problems and suggested reforms

This article examines some of the major market failures and government failures at work in the modern welfare state and investigates the political reasons for ignoring these failures in formulating welfare state policy. Next, the article examines some recent economic developments that endanger the welfare state: the expansion of international trade, skill-biased technological change, and the restructuring of firms. Finally, it suggests some policy approaches that may help make the welfare state more efficient and equitable.     

On justifying a minimum welfare state

Since anarchy is not viable, limited government is the best that the realistic libertarian can hope for. But limited government will itself always be threatened by an inherent tendency to transgress its limits. In modern western societies the regulatory and redistributive welfare state is the major threat to a constitution of liberty. However, a “minimum welfare state” which redistributes personal income among its citizens may comply with the same principles of individual liberty and the rule of law that are embodied in the protective state. Since any state, including the minimal state, necessarily incorporates regulation and redistribution and thus is a welfare state of sorts the non-anarchist liberal should turn against welfare state privileges rather than against redistribution and regulation per se. He may even have good reason to go beyond the minimal state to found a “minimum welfare state” if this is instrumental in securing liberty under the rule of law. I am grateful to the Center for the Study of Public Choice, George Mason University for hospitality both during the period in which this paper was written and on other occasions. I am deeply indebted to the people at the Center for their criticisms and comments. As far as this paper is concerned Geoffrey Brennan's and Richard Wagner's comments were particularly helpful. I should also like to acknowledge helpful oral comments from Kevin Mulligan and Philip van Parijs, who of course is much more of an expert on demogrant schemes than I am. I also wish to thank two anonymous referees for their valuable suggestions. The general caveat applies.     

Reforming the dutch welfare state: A scenario approach

The Dutch social protection system has been under reconstruction since the early 1980s. After describing the structure of the current system and addressing recent developments as to the treatment of families and individuals, this paper presents three scenarios that could develop in future years. In full individualization, benefits and conditions are attuned to individual citizens without considering their care for others and the financial means of others in their household. In a mini-system, statutory benefits are restricted to some minimum level. In further differentiation of the social minimum by household size, benefits are better attuned to the composition and size of household types. These three scenarios are evaluated based on four criteria. The differentiation scenario appears to meet nearly all criteria and seems to offer a new solution for the problem of the weak income position of households with children relative to other household types on the minimum income level.The author would like to thank David Rasmussen for his valuable comments on an earlier version of this paper.     

The impact of state economic differentials on household welfare and labor force behavior

This paper calculates state-specific income expectations for low-income households, using a simultaneous model of household labor force and welfare participation decisions. A variety of simulations indicate the interlocking effects of existing state differences in welfare, wages and taxes on work/welfare choices and income. Significant differences among similar households in different states occur. Equalization of welfare benefits eliminates some but not all of these differences, but generates potentially serious policy problems for the states.     

Misjudging the character of the welfare state: Hayek,generality, and the knowledge problem

What are the limits of collective action? As James Buchanan famously worried, is it possible to empower the productive state without lapsing into the predatory state? This paper uses insights from F.A. Hayek to address problems of public goods and the role of the state. Hayek convincingly argued that no central planner has sufficient knowledge to run an economy. Yet Hayek also allowed for state provision of some goods beyond the prevention of coercion. The question, then, is whether Hayek’s safeguards offer a satisfactory response to Buchanan’s worry. This paper contends that Hayek violated his own conditions for permissible government activity. Nevertheless, he offers a serious research agenda for limiting state abuses.     

In defense of a libertarian welfare state: response to Michael Shermer

Mr. Shermer worries that once we empower any organization to employ the force of law to mandate collective action of any kind, we will have embarked on a slippery slope to a totalitarian state that will destroy every liberty we cherish. This concern is overblown. Governments have been mandating collective action since the dawn of recorded history. And although history does, in fact, include a considerable number of brutally totalitarian states, people around the world clearly enjoy much greater liberty today, on balance, than they ever have.     

The welfare costs of corruption

Corruption has been shown to affect a variety of economic indicators, especially GDP per capita. However, as GDP is not a genuine indicator of welfare, it may reflect the welfare costs of corruption only in an incomplete way. This article uses self-rated subjective well-being as an empirical approximation to general welfare and shows that cross-national welfare?–?operationalized in this way?–?is affected by corruption not only indirectly through GDP, but also directly through nonmaterial factors. This article estimates the size of these effects as well as their monetary equivalent. The direct effect?–?not previously investigated in the corruption literature?–?is found to be substantially larger than the indirect effect.     

The welfare economics of the socialization of commodities

Socialization is defined for the purpose of this paper as the acquisition by the goverment of the total output of a commodity such as medical services and redistribution of that commodity equally to all citizens. Simple general equilibrium models are constructed to show that when decisions are reached by majority rule a commodity is more likely to be socialized the greater the inequality of income in the community and the less diverse the tastes of individuals for that commodity. The interests of producers of commodities are also taken into account, and strategic aspects of voting about socialization are discussed.     

The welfare cost of banking regulation

The Basel Accords promote the adoption of capital adequacy requirements to increase the banking sector's stability. Unfortunately, this type of regulation can hamper economic growth by shifting banks' portfolios from more productive, risky investment projects toward less productive but safer projects. This paper introduces banking regulation in an overlapping-generations model and studies how it affects economic growth, banking sector stability, and welfare. In this model, a banking crisis is initiated by an aggregated shock (in the risky sector) in a banking system with implicit bailout, and banking regulation is modeled as a constraint on the maximal share of banks' portfolios that can be allocated to risky assets. This model allows us to evaluate quantitatively the key trade-off, inherent in this type of regulation, between ensuring banking stability and fostering economic growth. The model implies an optimal level of regulation that prevents crises but at the same time is detrimental to growth. We find that the overall effect of optimal regulation on social welfare is positive when productivity shocks are sufficiently high (for example, in the subprime banking crisis episode) and economic agents are sufficiently risk-averse. Finally, we find that there is a trade-off between regulating the economy upfront (i.e. before the shock) and facing the challenge of making a huge bailout after the crisis.     

The welfare economics of dominant-firm acquisitions

Conclusion The main results of this paper provide some analytic underpinning for a strict horizontal merger policy relating to dominant firms. However, even under standard assumptions, examples have been demonstrated where dominant/fringe firm mergers increase welfare. Most of these examples imply shutting down acquired facilities, a practice regarded as unfavorable evidence by the court in theStandard Oil case; consequently, they do not by themselves seem to offer much hope for raising economies as an antitrust defense. Finally, it should be noted that this paper has considered only single-product economies; economies of scope arising in multi-product (and multi-market) contexts could be large enough to justify dominant/fringe firm mergers⁹.An earlier version of this paper was presented at the Economic Policy Office seminar, Antitrust Division, U. S. Department of Justice. The author is grateful to Marius Schwartz, other seminar participants and an anonymous referee of this journal for helpful comments. M. Daniel Westbrook and Brian Flynn kindly arranged for the calculations reported in Appendix C.     

Demand for redistribution,support for the welfare state,and party identification in Austria

This paper describes subjective wage inequality and the demand for redistribution in Austria using individuals’ estimates of occupational wages from the International Social Survey Program. Although these estimates differ widely across individuals, the data clearly show that most individuals would like to decrease wage inequality, relative to the level of inequality which they perceive to exist. The empirical analysis also shows that the demand for redistribution is strongly associated not only with variables describing self-interested motives for redistribution, but also with perceptions of and social norms with respect to inequality. Further, the demand for redistribution is a strong predictor for whether an individual is supportive of redistribution by the state. On the other hand, however, I find almost no evidence for an empirical association between the demand for redistribution and individuals’ party identification.     

The welfare costs of union wage compression

This paper calculates the quantitative significance of the welfare costs of union wage compression. This is done in a dynamic general equilibrium model with overlapping generations where agents choose both schooling (human capital) and assets (physical capital). The labor market in this model is characterized as a right-to-manage contract, which allows unions to compress wage differentials between high- and low-skilled workers, by implementing a binding minimum wage. This paper shows that when labor markets are competitive even low levels of wage compression lead to large welfare losses, since wage compression creates costly unemployment among low-skilled workers. The effect of wage compression on the supply of skilled labor, however, is rather small, since the disincentive effect of a lower, high-skilled wage is, to a large extent, offset by a lower opportunity cost of schooling due to higher unemployment.     

The capability theory and welfare reform

This essay examines the foundation of welfare reform in the light of Amartya Sen's capability theory and the implications of his theory in the context of contemporary industrialized society. A method to formulate the equality of capabilities and to capture its philosophical meaning is explored from the viewpoint of a fair distributive justice; two concepts of freedom, well‐being freedom and agency freedom ; and the process of human life.