The Korean Journal of Economic Studies
Economic Effects of Paradigm Change in Social Welfare Policy - Universal Social Welfare vs. Targeted
Young Jun Chun(Hanyang University), Sung Tai Kim(Cheongju University), Jin Young Kim(Konkuk University)Year 2013Vol. 61No. 2
Abstract
We study the economic effects of the paradigm change in social welfarepolicy from the targeted social welfare to the universal social welfare. Thesimulation results using a general equilibrium model, taking explicit account ofvarious aspects of adopting the universal welfare, such as increase in therisk-pooling, increase in tax burden, reduction of the moral hazard due to thehigh explicit tax rate imposed by the current policies, shows that: (1) thesocial welfare is not improved by the paradigm change to the universalwelfare; (2) the welfare cost of the paradigm shift is not high if the welfareexpenditure is not large, but the increase in the expenditure level to thatdiscussed recently will substantially deteriorate the social welfare; and (3) thechange in the social welfare depends more on the change in the average of thedisposable income, consumption, and leisure consumption, than on thechange in the degree of their fluctuation.