Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 159: OECD recommends: A Consensus For or Against Welfare States? Evidence from a New Database

Andreas Bergh () and Margareta Dackehag ()
Additional contact information
Andreas Bergh: The Ratio Institute and Lund University, Postal: The Ratio Institute, P.O. Box 3203, SE-103 64 Stockholm, Sweden
Margareta Dackehag: Lund University

Abstract: We describe the policy consensus in the OECD publication Economic Surveys, by constructing a database that contains both quotations and a quantification of the perceived reform need for 23 OECD countries around 1985, 1995 and 2005. Using the database, we examine whether or not the policy recommendations given by the OECD require welfare state cutbacks. We also examine how reform need correlates with social expenditure and income inequality. The recommendations in OECD Economic Surveys describe a policy consensus based on competition, work incentives, monetary reform, fiscal discipline and labor market reform. Reforms in these areas do not necessarily require welfare state cutbacks. Quantitatively, we find a significant positive correlation between reform need and social expenditure only for the mid 1990s, and no significant correlations between reform need and inequality. We conclude that OECD countries with large welfare states have managed to implement reforms without substantial welfare state retrenchment. The policy recommendations in Economic Surveys imply a restructuring of the welfare state but not necessarily welfare state cutbacks.

Keywords: Welfare state; reform; OECD

JEL-codes: C82; D63; P11

15 pages, November 30, 2010

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