We study the economic effects of the paradigm change in social welfare
policy from the targeted social welfare to the universal social welfare. The
simulation results using a general equilibrium model, taking explicit account of
various aspects of adopting the universal welfare, such as increase in the
risk-pooling, increase in tax burden, reduction of the moral hazard due to the
high explicit tax rate imposed by the current policies, shows that: (1) the
social welfare is not improved by the paradigm change to the universal
welfare; (2) the welfare cost of the paradigm shift is not high if the welfare
expenditure is not large, but the increase in the expenditure level to that
discussed recently will substantially deteriorate the social welfare; and (3) the
change in the social welfare depends more on the change in the average of the
disposable income, consumption, and leisure consumption, than on the
change in the degree of their fluctuation.