NBER

Karl O. Moene

Department of Economics
University of Oslo
Pb 1095 Blindern
0317 Oslo
Norway

E-Mail: k.o.moene@econ.uio.no
Institutional Affiliation: University of Oslo

NBER Working Papers and Publications

June 2009The Equality Multiplier
with Erling Barth: w15076
Equality can multiply due to the complementarity between wage determination and welfare spending. A more equal wage distribution fuels welfare generosity via political competition. A more generous welfare state fuels wage equality further via its support to weak groups in the labor market. Together the two effects generate a cumulative process that adds up to an important social multiplier. We focus on a political economic equilibrium which incorporates this mutual dependence between wage setting and welfare spending. It explains how almost equally rich countries differ in economic and social equality among their citizens and why countries cluster around different worlds of welfare capitalism---the Scandinavian model, the Anglo-Saxon model and the Continental model. Using data on 18 OECD c...

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