Work Norms, Social Insurance and the Allocation of Talent.
SFB/TR 15 Discussion Paper No. 405
This paper challanges the view that weak work norms in generous welfare states makes them economically unsustainable. I develop a dynamic model of family-transmitted values that has a laissez-faire equilibrium with strong work norms coexisting with a social-insurance equilibrium with weak work norms. While the former has better incentives, the latter induces more intergenerational occupational mobility which improves the allocation of talent and fuels
growth. Strong work norms arise as a defensive strategy of parents that aims at perpetuating
their occupation along family lines. I present evidence from microdata showing that generous
social insurance correlates with high intergenerational occupational mobility and that more mobile individuals endorse weaker work norms.