Sustainable Social Spending

The paper discusses a number of threats to the financial sustainability of social spending: increased internationalization of national economies, gradually higher relative costs of producing a number of human services, the quot;grayingquot; of the population, slower productivity growth in the private sector, low employment rates, and various types of disincentive effects related to the welfare state itself, including moral hazard. I argue that threats from gradually rising costs of providing human services and disincentive effects of welfare-state arrangements, in particular moral hazard and benefit dependency, are more difficult to deal with than the other threats. I also discuss the choice between ad hoc policy reforms and automatic adjustment mechanisms, delegated to administrative bodies, for dealing with these threats