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The Nordic EU member states faced a severe economic crisis in the early 1990s, giving rise to social, economic and financial imbalances. Nonetheless, Sweden, Finland and Denmark quickly returned to budgetary balance, then to surplus. Did discretionary fiscal adjustments lead to reductions in structural social expenditures or to reshuffling within social expenditure? To what extent have fiscal adjustments affected the main features of the Nordic social welfare model? This study deals with these questions on the basis of empirical analysis of fiscal adjustment affecting public social expenditure. We show that social expenditures were significantly reduced in the course of the fiscal consolidation plans implemented between 1993 and 1998; that the brunt of the reductions were in cash benefits, whereas social services were largely spared; and finally that cuts were across the board hit all social risks in Sweden and more targeted in Finland and Denmark. In addition, reductions in public social expenditure were accompanied by increases in personal income tax and in social contributions.

Christel Gilles
Michèle Lelièvre
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