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14 - Privatewelfare and the welfare state

Published online by Cambridge University Press:  05 March 2014

Larry Neal
Affiliation:
University of Illinois, Urbana-Champaign
Jeffrey G. Williamson
Affiliation:
Harvard University, Massachusetts
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Summary

This chapter summarizes the causes and consequences of the rise in aid, and the prospects for reversing the shift toward public aid in the twenty-first century. It emphasizes the kinds of social insurance and social assistance that have always generated more controversy because they involve more vertical redistribution of income. Microeconomists have developed theoretical ideas that seem to have good predictive power, and some have even been tested on data since the 1960s. The effect of rising incomes on private insurance supply works indirectly through the tendency of growth and development to cut the cost of capital to insurance firms. Even in the nineteenth and early twentieth centuries, support for social insurance and assistance rose only at a modest pace, relative to the ability to pay. The rise of tax-based social insurance and assistance seems like a success story, capturing large gains in GDP as well as greater income security.
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Publisher: Cambridge University Press
Print publication year: 2014

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