Financing the Welfare State

11 Pages Posted: 27 May 2008 Last revised: 16 Jul 2009

See all articles by Kees Goudswaard

Kees Goudswaard

Leiden Law School - Department of Economics

Koen Caminada

Leiden Law School - Department of Economics

Henk Vording

Leiden University - Leiden Law School

Date Written: May 22, 2006

Abstract

Insight into the level and nature of taxes and social insurance contributions may be important for the perception of citizens about the costs of public provisions and - associated with this - for their behavioral responses. From the theoretical literature on tax illusion and from several empirical studies we conclude that when a clear relation is experienced between the payment of social contributions and accrued rights, employees perceive contributions more as prices than as taxes. Because of this these contributions will have fewer distorting effects on the labor market than general taxes. Reforms of social insurance programs that strengthen buildup elements, for instance through the introduction of social saving accounts, would therefore have favorable labor market effects.

Keywords: welfare state, tax illusion, economic effects of contributions, social saving accounts

Suggested Citation

Goudswaard, Kees and Caminada, Koen and Vording, Henk, Financing the Welfare State (May 22, 2006). Tax Notes International, Vol. 42, No. 8, 2006, Available at SSRN: https://ssrn.com/abstract=1137589

Kees Goudswaard (Contact Author)

Leiden Law School - Department of Economics ( email )

P.O. Box 9520
2300 RA Leiden, NL-2300RA
Netherlands

Koen Caminada

Leiden Law School - Department of Economics ( email )

P.O. Box 9520
2300 RA Leiden, NL-2300RA
Netherlands
++31715277858 (Phone)

HOME PAGE: http://www.law.leiden.edu/organisation/taxlawandeconomics/economics/staff/caminada.html

Henk Vording

Leiden University - Leiden Law School ( email )

P.O. Box 9520
2300 RA Leiden, NL-2300RA
Netherlands

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