Welfare and economic development: Lessons from the origins of the welfare state

How does geographical redistribution influence the economy and welfare in the long run? How do labor market reforms influence unemployment and local development? And how does social-democratic rule influence welfare benefits?
From a historical perspective, little is known about the long-run economic and welfare effects of the policies and reforms associated with the initial rollout of the Danish Welfare state. We will quantitatively investigate the origins of the welfare state and the resulting distributional and economic consequences.

That history tends to repeat itself and that historical evidence can be of contemporary relevance for policy decisions were recently exemplified by the economic uncertainty related to the outbreak of Covid-19.

Whether the economics effects would be short or long-lived was uncertain in March 2020. Our historical research from the Great 1918-Influenza Epidemic in Denmark, however, suggested moderate short-lived effects on the economy, which at this time seems as a more accurate description of the impacts of Covid-19 on the economy, compared to the predictions made by many macroeconomists at the onset of the epidemic.

In recent political reforms, such as “Bedre Balance” and “Flere og Bedre Uddannelsesmuligheder i hele Danmark”, and in current debates, policy makers aim to create a more geographically balanced country by redistributing state jobs and education possibilities from urbans centers to less densely populated areas, as well as creating a more equal access to the health care sector.

However, relatively little is known about the effects of such regional reforms and in particular so over longer time horizons:

Does redistribution, in fact, create more equal opportunities for people living in rural areas? Are the reforms costly or can the country as a whole benefit from them? That is, in the words of an economist, how large are the aggregate efficiency costs (or gains) by redistributing resources towards, presumably, less productive regions?


Part I: We use historical evidence from The National Redistribution Fund to study if the pillars of the welfare state led to better health and labor market outcomes and evaluate the long-run costs and benefits.

Part II: We evaluate the effects of classical 1st generation labor-market reforms implemented over the period from 1919 to 1950, which further allows us to compare the relative effectiveness of the two types of policies in contemporary economic settings.

Part III: We investigate a reform that allows us to study the role of local democracy and social democratic rule for the size of government and local economic development.






Name Title Job responsibilities Image
Casper Worm Hansen Professor Mortality; Life Expectancy; Demographic Changes; Long-run Economic Growth; Macroeconomics of Development Billede af Casper Worm Hansen

Funded by:

Logo The Rockwool FoundationWelfare and economic development: Lessons from the origins of the welfare state has received a three year funding from The Rockwool Foundation

Period:  2024 - 2026


Principal investigator Casper Worm Hansen

External members:

Name Title Phone E-mail
Peter Sandholt Jensen Professor E-mail