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Welfare State Economics


Admission requirements

Students are highly recommended to have intermediate knowledge on public economics, see e.g. Public Finance of Rosen and Gayer. Those who do not have an extensive background in economics and want to read more about economics can use the following book: Principles of Economics, Moore McDowell, Rodney Thom, Ivan Pastine, Robert Frank, Ben Bernanke. McGraw-Hill Education. Two important topics for this course are, 1) Marginal costs and benefits versus average costs and benefits: pages 11-13, and 2) Indifference curve analysis and the demand curve: pages 125-138.


Governments implement welfare state programs to protect their citizens to social risks such as falling sick, becoming unemployed, ageing or the occurrence of health costs. These programs, that range from public benefits to the regulation of private insurance markets, may have a strong impact on the income, well-being and the behavior of individuals. Welfare state programs are typically justified by equity and public responsibility, but at the same time the growth of public expenditures force governments to make more efficient use of existing resources. This gives rise to a tension between equity and efficiency considerations.

This course provides an economic perspective on the design of equitable and efficient welfare state programs. The course starts with exploring the fundamental arguments for state intervention and the provision of social insurance, using concepts from insurance theory. Next, attention will be devoted to different welfare state interventions, including cash benefits (such as unemployment insurance, sick pay, disability insurance and pensions) and benefits in kind programs (e.g. health care and labor market programs). Throughout the course, these programs will be assessed along the line of equity and efficiency measures, using insights from the empirical literature on the effect of welfare state interventions on individual behavior and social outcomes.

Course objectives

By the end of this course, students will be able to assess the concepts of the welfare state from an economic perspective:

  • Students are able to identify the key equity and efficiency arguments for the provision of various welfare state programs

  • Students understand the concepts of insurance theory and their implications for the provision of social insurance.

  • Students can critically evaluate empirical applications about individual behavior in the context of the welfare state.

  • Students are able to apply their knowledge on real life welfare state programs, of which they can evaluate, judge and communicate their pros and cons.


On the Public Administration front page of the E-guide you will find links to the website and timetables, uSis and Brightspace.

Mode of instruction

The course consists of seminars on the one hand and interactive meetings with exercises on the other hand.

Course Load

  • Total course load 140 hours

  • Hours spent on attending seminars 14 (7 x 2 hours)

  • Hours spent on attending interactive meetings 14 (7 x 2 hours)

  • Written exam 5 hours

  • Time for studying compulsory literature and completing assignments 107

Assessment method

Gradings will be based on the quality of the policy paper and on participation during the lectures and the interactive meetings (25% weight), together with an exam at the end of the course (75% weight). We offer a re-examination for the written exam, but not for the policy paper and participation. A sufficient score for the policy paper and participation remains valid during the current and the next academic year.

In the exceptional situation in which a sufficient score for the exam (75%) and an insufficient score for the policy paper and participation (25%) lead to an insufficient end grade for the course, there is a retake for the insufficient 25% score (by writing a review report of a scientific paper).

Reading list

N. Barr (2020), Economics of the Welfare State, sixth edition, Oxford University Press

Journal papers will be announced on Brightspace.


Register for every course and workgroup via uSis. Some courses and workgroups have a limited number of participants, so register on time (before the course starts). In uSis you can access your personal schedule and view your results. Registration in uSis is possible from four weeks before the start of the course.

From the academic year 2020-2021 Leiden University uses Brightspace as its online learning management system. After enrollment for the course in uSis you will be automatically enrolled in the Brightspace environment of this course.


Marike Knoef