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The Equality Multiplier: How Wage Compression and Welfare Empowerment Interact

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  • Erling Barth
  • Karl Ove Moene

Abstract

We explore how more wage equality fuels the generosity of the welfare state via political competition in elections, and how a more generous welfare state fuels wage equality via empowerment of weak groups in the labor market. Together the two mechanisms may generate a cumulative process that explains how equality multiplies, and why countries with more equal distributions of market outcomes also have stronger welfare states. The complementarity between wage setting and welfare spending can explain why almost equally rich countries differ so much in economic and social equality among their citizens.

Suggested Citation

  • Erling Barth & Karl Ove Moene, 2016. "The Equality Multiplier: How Wage Compression and Welfare Empowerment Interact," Journal of the European Economic Association, European Economic Association, vol. 14(5), pages 1011-1037.
    • Handle: RePEc:oup:jeurec:v:14:y:2016:i:5:p:1011-1037.
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    File URL: http://hdl.handle.net/10.1111/jeea.12163
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    Citations

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    Cited by:

    1. Roberto Iacono, 2018. "The Nordic Model of Economic Development and Welfare: Recent Developments and Future Prospects," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 53(4), pages 185-190, July.
    2. Sungmun Choi, 2019. "Is the Current Trend of Income Inequality Sustainable?," Sustainability, MDPI, vol. 11(19), pages 1-16, September.
    3. Emilio Carnevali & André Pedersen Ystehede, 2023. "Is socialism back? A review of contemporary economic literature," Journal of Economic Surveys, Wiley Blackwell, vol. 37(2), pages 239-270, April.
    4. Erling Barth & Henning Finseraas & Anders Kjelsrud & Karl O. Moene, 2021. "Does the Rise of China Lead to the Fall of European Welfare States?," Working Papers 202007, Oslo Metropolitan University, Oslo Business School.
    5. Kristin Alsos & Kristine Nergaard & Andreas Van Den Heuvel, 2019. "Collective bargaining as a tool to ensure a living wage. Experiences from the Nordic countries," Transfer: European Review of Labour and Research, , vol. 25(3), pages 351-365, August.
    6. Barth, Erling & Finseraas, Henning & Kjelsrud, Anders & Moene, Kalle, 2023. "Openness and the welfare state: risk and income effects in protection without protectionism," European Journal of Political Economy, Elsevier, vol. 79(C).
    7. Roberto Iacono, 2019. "The Norwegian Oil Bonanza and the Scandinavian Model in Comparative Perspective," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(1), pages 63-82, March.
    8. Erling Barth & Henning Finseraas & Anders Kjelsrud & Kalle Moene, 2023. "Hit by the Silk Road: how wage coordination in Europe mitigates the China shock," Scandinavian Journal of Economics, Wiley Blackwell, vol. 125(1), pages 32-72, January.
    9. Steffen Torp & Jon Reiersen, 2020. "Globalization, Work, and Health: A Nordic Perspective," IJERPH, MDPI, vol. 17(20), pages 1-20, October.
    10. Marta Schoch, 2020. "Essays on political economy, inequality and development," Economics PhD Theses 0120, Department of Economics, University of Sussex Business School.

    More about this item

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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