TY  - JOUR
AU  - Barth,Erling
AU  - Moene,Karl O.
TI  - The Equality Multiplier
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15076
PY  - 2009
Y2  - June 2009
UR  - http://www.nber.org/papers/w15076
L1  - http://www.nber.org/papers/w15076.pdf
N1  - Author contact info:
Erling Barth
Institute for Social Research
P.O. Box 3233 Elisenberg
0208 Oslo
Norway
Tel: +(47) 23 08 61 43
E-Mail: erlingba@econ.uio.no

Karl O. Moene
Department of Economics
University of Oslo
Pb 1095 Blindern
0317 Oslo
Norway
E-Mail: k.o.moene@econ.uio.no
M3  - presented at "Agents of Technological Progress", June 1, 2009
AB  - 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 countries over the period 1976-2002 we test the main predictions of the model and identify a sizeable magnitude of the equality multiplier. We obtain additional support for the cumulative complementarity between social spending and wage equality by applying another data set for the US over the period 1945-2001.
ER  -