Growth of the Benefit System in UK

Bhattarai, Keshab

Abstract

The benefit system has expanded by ten times in the UK after the adoption the Beveridge social security system in 1940s. It has protected vulnerable people but also brought price distortions and adverse consequences in the economy. Efficiency issues relating to the this benefit system are analysed theoretically applying basic theories of the conditional general equilibrium model for benefit payments, natural rate of unemployment and state-space Markov process of transitions between employment and unemployment. Empirical analysis shows that the unemployment rate and the working age population are the major reasons for increase in the number of benefit claimants. This falls with higher weekly, monthly or annual pays and the duration of spells in the benefit. At macro level the growth rates of inflation indexed benefits are inversely related to that of output and the ratio of debt to GDP. Growth rates are lower with an increase in the level of benefits. These findings are based on cross section data of 201 British counties, monthly time series of vacancies redundancies and unemployment from 1992:1 to 1212:11 and panel data of 10640 wards form 2006 to 2014.

Citation

Bhattarai, K. (2021). Growth of the Benefit System in UK. Journal of Development Economics and Finance, 2(1), 153-176

• Journal Article Type: Article
• Acceptance Date: May 11, 2021
• Online Publication Date: Jun 5, 2021
• Publication Date: Jun 5, 2021
• Deposit Date: Jun 9, 2021
• Publicly Available Date: Jun 14, 2021
• Journal: Journal of Development Economics and Finance
• Publisher: ARF India
• Peer Reviewed: Peer Reviewed
• Volume: 2
• Issue: 1
• Pages: 153-176
• Keywords: Tax; Benefit
• Public URL: https://hull-repository.worktribe.com/output/3787327
• Publisher URL: http://arfjournals.com/abstract/32659_10_keshab_bhattarai.pdf