I don’t have much to add to Will Wilkinson’s excellent take on the new Price Fishback research comparing U.S. social welfare spending to Scandinavian social welfare spending. This is a drum I’ve been beating on for a while: as Christopher Howard argued in The Hidden Welfare State, our social welfare spending is comparable to what we see in continental Europe. The difference is that U.S. welfare spending placing far heavier emphasis on tax subsidies and other indirect levers. Will rightly highlights the importance of looking at net transfers — through broad-based consumption taxes, as Peter Lindert argued, the Scandinavian countries charge the working poor quite high prices for their high-quality public services.

Will ends his post on a provocative note:

What’s striking to me is that lower levels of inequality aren’t buying the Nordic countries higher levels of welfare benefits. If the relative stinginess of the U.S. safety net at the very bottom is a bad thing, but not somehow causally related to income levels at the top half of the distribution, the necessary reforms likely have nothing much to do with reducing the dispersion in incomes.

One of the comparative findings I find most interesting is the striking similarly in market income Gini between the U.S., Germany, and Sweden. You’ll recall that many believe that higher union density, etc., will tend to decrease inequality. This could be true insofar as higher union density creates political pressures that lead to higher transfers, yet it seems that higher union density doesn’t have a slam-dunk effect on wage dispersion. Rather, almost all OECD countries have seen an increase in wage dispersion, across many different policy regimes. The exceptions, Holland and Denmark come to mind, very interesting. Denmark’s Gini picture has undoubtedly been impacted by high levels of emigration among high earners.

Anyway, there’s no glib conclusion to be drawn here, other than that enthusiasts for the Scandinavian model should pay closer attention to how it actually works. You want a less progressive tax regime and unions that are so large that their pricing power is actually fairly weak and decentralized social service provision and strong stigmatization of family disruption? Well, okay then.