Incentives in the Welfare-State

This paper deals with economic incentives and welfare-state arrangements in OECD countries. It discusses both positive and negative incentives for economic efficiency and economic growth. After an analysis of static considerations the paper concentrates on what may be called "dynamic" incentive issues, i.e. incentive effects that evolve over time. The discussion covers also the interplay between incentives and social norms among individuals, including endogenous changes in these norms. A number of marginal and radical reforms of the welfare state are discussed. At the end, the paper offers some lessons for would-be welfare states.