In the post-war period, spending on social security, health and education has grown continuously in the leading industrialized countries. The considerable size of this spending as a percentage of GDP together with the ageing population raise doubts on the sustainability of welfare spending. These doubts have been accompanied in recent years by an increasing awareness of the allocational inefficiencies and the distributive inequalities caused by the provision of some social services. The welfare state should therefore be reconstructed not only through readjustment of the social security system but also a change in unemployment benefits and the taxation of workers to avoid the perverse spiral that may be produced in the future by cuts in welfare benefits, growing unemployment and the need to further reduce the social security services.

Preface - Notes on the Contributors - PART 1: PROBLEMS OF THE WELFARE STATE - What is the Domain of the Welfare State?; D.J.Snower - On the Damaging Side Effects of the Welfare System: How, Why and What to Do; E.S.Phelps - PART 2: ACTIVE LABOUR PRACTICES AND THE WELFARE STATE - Subsidizing Employment rather than Unemployment; R.Layard - The Labour Market, The Welfare State and European Convergence; R.Brunetta, L.Tronti & R.Turatto - Economic Effects of Work Sharing in a Dynamic Labor Turnover Model; H.T.Hoon - PART 3: ECONOMIC POLICIES AND THE WELFARE STATE - Unemployment, Competitiveness and the Welfare State; R.Mundell - Labour Market Regulation in Italy, Employment and Welfare; G.Goisis & D.Porrini - On a Recent Change in the Notion of Incomes Policy; G.Caravale - Welfare Spending and Employment Subsidies; C.Dell'Aringa PART 4: EQUITY AND EFFICIENCY - Is the European Welfare State Unsustainable?; E.Malinvaud - Distributive Equity and Economic Efficiency: Trade-off and Synergy; M.Baldassarri & G.Piga - Economic Growth, Poverty and Government: Income Support Programmes with Applications to Australia; N.Kakwani - PART 5: COMPETITIVENESS AND THE WELFARE STATE - Welfare State: Leaner or Starved? Competitiveness and Social Cohesion; J-P.Fitoussi - Deregulation, Welfare State and Competition in the Goods and Labor Markets; F.Forte & F.Padovano - The Welfare System and Endogenous Growth; E.S.Phelps - PART 6: ROUND TABLE ECONOMIC POLICY 'RECOMMENDATIONS'; G.de Rita, M.Baldassarri, F.P.Schioppa Kostoris, F.Forte & M.Bagella - Index