Exercises for seminar 7
Exercises for this week's seminar:
1) Consider available statistics over public spending from WWII till today - for example from OECD-outlook (the data are most accessible from 1980s):
i.How would you characterize the long term social spending across countries and over time?
ii.Which countries expand the most their welfare states? (here is a link to data from 1980s https://stats.oecd.org/Index.aspx?DataSetCode=SOCX_AGG)
iii. It seems that the countries that expand their welfare state the most (a) are small open economies, (b) have comprehensive organizations in the labor market and (c) have a low level of inequality in pre-tax and -transfers wage distributions.
How would you explain this? Is it right that globalization leads to more generous welfare states?
In addition to using the data from OECD, you can have a look at this paper by Kalle Moene and Erling Barth for inspiration in answering these questions above: http://www.sv.uio.no/esop/
2a) What is an equality multiplier? How would you explain the underlying mechanism?
Here is an example of an equality multiplier:
I=Inequality of wages
W=welfare spending
A, B, a, and b positive constants with a<1, and b<1.
We have the following relationship (try to explain each separately)
I= A-aW
W= B-bI
Solving them show that
I=[1/(1-ab)](A-aB) and W=[1/(1-ab)](B-bA)
2b) Explain - in this context - what is the equality multiplier? How does it work? What can it help explain of the post war period?
3) Evaluating the welfare state in 1989, the Economist wrote ''the heart of the success of the political right has been its ability to use genuinely value-neutral research and theory of economists ... the left's failure has been ... to assume that the developments in contemporary political economic thought would go away'' (17 June 1989).
a) What does this quote say?
b) How does it relate to the factual historical development?