AØKA08187U Economics of Welfare

Volume 2013/2014
BSc in Economics
MSc in Economics

Most western countries are welfare countries with a high income per capita, and a relatively equal distribution of the income in a well-developed democracy. The governments and parliaments have not handed over the distribution of the income to the market alone, but have taken over both in order to obtain another distribution but also to prevent or repair market failures. In Denmark where the welfare thought/idea is widespread the public sector is large and it takes care of the distribution of 50% of the economy. By that a trade-off is arisen between the wish to obtain social justice and the demand for economic efficiency. This is the main theme in the social welfare policy. Will the welfare state survive and how will it get through the global financial crisis.

The social welfare policy is undergoing remarkable change in the 21’ century. Within the 20’ century the transition in the welfare system took place – from classical capitalism to modern welfare economy, a mixed economy in a market with a large public sector. Now the western market is facing the challenge from the globalization, demography – with the prospect of lack of labor forces and increase in the senior part of the population. In Denmark the senior part of the population (over 60 years) is increasing from today 20% to 30” in 2050. But countries as Spain and Italy will reach as high as 40% and there over. In Denmark the welfare accord 2006 and 2011 will result in later retirement age and public pensions.

The aim for the course is therefore to apply insight in the theories behind the welfare policy. To illuminate the structure and the meaning of the welfare policy today. And by this insight to be able to analyze the challenges that the society and in the social policy, are facing in this century.

The curriculum is split up in 7 themes/subjects.

3 main themes:

AI - The Social Welfare challenge of the future economy

AII - The Theory of Social welfare

AIII - The current and historical ideological basis for the social welfare state

And 4 special themes/subjects:

BI - Economic distribution, redistribution, poverty and disintegration. A sub-theme of this curriculum is immigration, integration and fiscal sustainability.

BII - Pension and retirement

BIII - Flexicurity, Incentive structure of the Danish Labor market

BIV - State, Market, And civil society.

Learning Outcome

One of the most important aspects of the western countries economy and structure of the society are that they are welfare states. Denmark is a leading country with regard to welfare. This course aim is to study these aspects in these countries. The social policy and the welfare policy will be under severe challenges.

The demographic challenge is the biggest challenge in the future macroeconomic milieu in the vest. It is challenging the whole structure and design in the current welfare system. All societies will be influenced by the increasing ageing, but also by the globalization, and the increasing individualism, which will place great demands on the structure of the social policy. The course Economics of welfare will contain main elements of analysis on the future sustainability of the economy.

 Achieved competence after the course:

It will be expected of the students – finishing this course – that they will be qualified to be able to administrate economic and political analyzing functions, on a fair level in both the public and private sector. Some students could be employed in analysis functions/jobs in research units or units of analysis, other students in this course can be employed in international as well as national – regional or in municipalities – as well as in private companies, banks, insurance and in pension funds, and voluntary institutions, and social, humanitarian associations and NGO’s who are working with social welfare, social conditions or pensions.

 Aim for the course: Economics of welfare:

Within the welfare policy the students will analyze and understand the consequences of the different social welfare political models and at the same time analyze a long row of macroeconomic consequences.

To obtain highest grade at the exam the students (when they have understood, finished, and read the course) are expected to master the following:

  • Be able to analyze and understand the different outcome of institutional solutions on the background of different historical decisions, and analyze the economic consequences, which are connected with changes in the system (in Denmark amongst other countries). And understand and analyze the structure of the Danish Welfare state today.
  • To obtain a thorough knowledge of social welfare theory, and its central economic theoretical ground ideas. This includes understanding the trade-off between social justice and economic efficiency, and when it is optimal to provide private insurance benefits, versus state intervention. Finally, required an elementary knowledge of the DREAM-model.
  • To be able to analyze differences and inequalities between different segments in the population. The student should be able to understand and analyze the concept of poverty, disintegration and the economic diversion between rich and poor, between generations and the life circle hypothesis.
  • Be able to understand and calculate elementary economics and statistical sizes in basic demography and be able to recognize and understand the economic model for “generational accounting” and to use this model in relevant countries.
  • Be able to understand and analyze the actuarial technique behind pension schemes. Understand and analyze “the five financial sources” impact on different goals and be able to work with different models on labor supply and the influence on retirement from the labor market (the neo classic and the pull, push jump theory)
  • To be able to understand, and analyze social welfare policy and its many alternative solutions in the market, in the public welfare, and in the civil society.


  1. Nicolas Barr: Economics of the welfare state, Oxford University Press, 2012, p. 16-251
  2. Bjarne Hastrup: The social contract between the generations, Mulitvers 2008, p.17-79, p. 93-129, p. 166-260, p.262-291
  3. Bjarne Hastrup: Social Welfare – The Danish Model, Mulitvers 2011, p.76-218, p. 230-247, p. 259-272, p. 438-448.
  4. OECD: Growing unequal? Income, Distribution, and poverty in OECD Countries, OECD 2008 p. 23-223, 281-307
  5. L. J. Kotlikoff, A.J. Auerbach amongst others: Generational Accounting,Around the world, The University of Chicago Press, 1999, p. 1-7, chap. 2 p. 31-41, chap. 4, p. 73-101, chap. 10, p. 219-239, and chap. 12 p. 277-299
  6. DREAM rapport, 2011, English Edition, Multivers 2012 p. 8-167
  7. Lars Haagen Petersen and Torben M. Andersen: Financial Restraint in a mature welfare state, the case of Denmark, Oxford Review of Economic Policy vol. 22, Issue 3, 2006 (30P)
  8. DORS, English summery, Autumn 2012 and fall 2009, (20+25P)
  9. Torben M. Andersen Welfare State, the Scandinavian model. Economics working paper 2011 – 1 (27P)
  10. Poul Schou immigration integration and Fiscal sustainability, journal of population economics, October 2005 (21P)
  11. Actuarial calculations – Bjarne Hastrup, 2012 – (5P)
  12. Private or public production note Bjarne Hastrup, 2012 (10P)
  13. Torben M. Andersen- why do Scandinavians work? Cesito working paper no. 3068


Optional readings:


  1. Bjarne Hastrup, Den sociale velfærd I Danmark på bagrund af to udgivelser om dansk velfærdshistorie i Nationaløkonomisk tidsskrift (2010 Danish with an English abstract)
  2. Flexicurity and beyond – finding a new agenda for the European social model. Henning Jørgensen and Per Kongshøj Madsen (EDS) DJØF publishing 2007 (English)
  3. The politics of social solidarity – Peter Baldwin, Cambridge Univesity Press 1990 (English)
  4. The new politics of the welfare state – Paul Pierson – Oxford University press, 2002 (English)
  5. Oxford Handbook of Pensions and Retirement Income – Gordon L. Clark, Alicia H. Munnell, J. Michael (2006) (English)
  6. The Handbook of West European Pension Politics – Ellen M. Immergut, Karen MM. Anderson, Isabelle Schulze (English)
  7. Ageing and Employment policies, OECD 2005 (English)
  8. DLFS –The Danish Longitudinal Future Study, Oxford Institute of Ageing 2007
  9. Velfærdskommissionens slutrapport (2006) (Only in Danish)
  10. Verdens Danmark, Bjarne Hastrup, Multivers 2006 (Only in Danish)
  11. Contemporary Danish Society, Bjarne Hastrup, 1995 (English)
  12. Danmarks Statistisk befolkningsprognose (Statistisk årbog) (Only in Danish)
  13. UN’s Demographic Prospects 2050 (English)(2001)
  14. The welfare state typologies, Denmark in a comparative perspective
    Walter Korpi (2002) P. 9 – 71 (W.K 02) (Only in Danish)
  15. Axel Mossin, The Social policy and the welfare state policy, note 86 (Only in Danish)
  16. DØR December 2006 May – November 2010 (in Danish with English summary)(Lastest issue – Summary)
  17. Why we need a new welfare state, Gøsta Esping-Andersen, Oxford University Press, 2003 (English)
  18. Sociale ydelser Hvem, hvad og hvornår? (Social Contributions – Who, what, and when) Forsikringsoplysningen (2010) (Only in Danish) (Latest issue)
  19. Værd at vide 2011, Munksgaard, Ældre Sagen 2011 (Only in Danish) (Latest issue)
  20. Indkomster 2008, Danmarks Statistik (2010) (Income in 2008) (Only in Danish)
  21. Socialforskningsinstituttet (SFI) 2002, Fordeling af velfærd i Danmark (distribution of welfare ind Denmark)
  22. Martin Feldstein and Jeffrey B. Liebman, The distribution of social security, the University of Chicago Press 2002 (English)
  23. Jan Plousing, Velfærdsstat og socialpolitik, Handelshøjskolens forlag, 2004 (welfare state and social policy) (Only in Danish)
  24. Befolkningens bevægelser, Danmarks Statistik (Latest edition)(Only in Danish)
  25. Ageing Health and productivity, The Economics of increased life expectancy. Pietro Garibaldi, et, al. Oxford University Press, 2010


There may be incongruence or lack of consistency between the hand-outs and curriculum.

Then the curriculum applies and will always be the valid curriculum at the exam.

General knowledge in macro economy and welfare policy. Welfare politics and the Social welfare state is International, and in Denmark it’s a divided field.
Economists can immediately be able to follow the course in an extension of Macroeconomics C. The course requires analytical skills in light of future economic challenges (e.g., demographics, Globalization, individualization, and the large public debt reorganization)
4 hours of lectures per week for 14 weeks
  • Category
  • Hours
  • Exam
  • 28
  • Lectures
  • 56
  • Preparation
  • 191
  • Total
  • 275
Type of assessment
Written assignment, 28 hours
The exam is 28-hours take-home assignment
All aids allowed
Marking scale
7-point grading scale
Censorship form
External censorship
100 % censurship
Exam period
Will be updated before the start of the semester
Same as ordinary. But if only a few students have registered for the re-exam, the exam might change to an oral exams with a synopsis to be handed in. This means that the examination date also will change.
Criteria for exam assesment
The Student must in a satisfactory way demonstrate that he/she has mastered the learning outcome of the course.