Scholarly Evidence against the Welfare State

One of these days, we’re going to come to our economic senses. Soon, I hope.

International Liberty

I repeatedly try to convince people that the welfare state is bad for both taxpayers and poor people.

Sometimes I’ll add some more detailed economic analysis and explain that redistribution programs undermine growth by reducing labor supply (with Obamacare being the latest example).

And I’ve even explained that the welfare state has a negative impact on savings and wealth accumulation (these dramatic charts show Social Security debt in America compared to ever-growing nest eggs in Australia’s private pension system).

But if new research from the European Central Bank (ECB) is any indication, I should be giving more emphasis to this final point.

Culling from the abstract, here’s the key finding from the working paper by Pirmin Fessler and Martin Schürz.

…multilevel cross-country regressions show that the degree of welfare state spending across countries is negatively correlated with household net wealth. These findings suggest that social services provided by…

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