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Eötvös Loránd University, Department of Econonomics

Economics of the welfare state

From a cross-sectional prospective the welfare state mitigates poverty and inequalities. However, a life-cycle approach makes clear that poverty risks are not uniformly distributed over the life-cycle. By this approach institutions of the welfare state seem more to be means of life-cycle financing than devices of poverty alleviation. People in their active age transfer much more resources to people in their inactive age (children and the elderly) than the rich redistribute to the poor within their own generation. What is more, even much of the intra-generational redistribution take place between genders as a kind of correctional device for mitigating the shortcomings of the life-cycle financing system.



The course is split to two parts. In the first part we cover the cross-sectional interpretation, measurement and Hungarian trends of poverty and inequality. In addition, we discuss the costs, effectiveness and efficiency of institutions designed in order to alleviate poverty and moderate inequalities. We also talk about the political economy of cross-sectional income redistribution.



In the second part we will see how this landscape changes if welfare institutions are considered devices of life-cycle financing rather than in cross-section. We cover new statistical indicators, a new family of political economy models, new cost components of the welfare state (redistribution across entire life-cycles, fertility effects) as well as an extension of ethical issues of cross-sectional redistribution to intergenerational problems.