A welfare state is a concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those unable to avail themselves of the minimal provisions for a good life. The general term may cover a variety of forms of economic and social organization. The sociologist T.H. Marshall identified the welfare state as a distinctive combination of democracy, welfare, and capitalism. Scholars have paid special attention to the historic paths by which Germany, Britain and other countries developed their welfare state.
Modern welfare states include the Nordic countries, such as Iceland, Sweden, Norway, Denmark, and Finland which employ a system known as the Nordic model. Esping-Andersen classified the most developed welfare state systems into three categories; Social Democratic, Conservative, and Liberal.
The welfare state involves a transfer of funds from the state, to the services provided (e.g., healthcare, education) as well as directly to individuals ("benefits"). It is funded through redistributionist taxation and is often referred to as a type of "mixed economy".Such taxation usually includes a larger income tax for people with higher incomes, called a progressive tax. This helps to reduce the income gap between the rich and poor.
Welfare's effect on poverty
Empirical evidence suggests that taxes and transfers considerably reduce poverty in most countries whose welfare states constitute at least a fifth of GDP. Most welfare states have considerably lower poverty rates than they had before the implementation of welfare programs.