The Equality Multiplier

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.

Unions' Threats and Wage Determination.

This paper considers local wage bargaining as a sequential game and focus es on how different rules of the game affect employment and equilibri um payment to workers and employers. Work-to-rule and other go-slow t hreats lead to low employment, while strike threats lead to high empl oyment. An increase in the bargaining power of the union induces high er or unchanged equilibrium employment in the strike-threat case, whi le employment is reduced in the slow-down case. Finally, if all kinds of industrial actions are legal, only one is credible. Which type de pends on the parameters of the model. Copyright 1988 by Royal Economic Society.

Does the Logic of Collective Action Explain the Logic of Corporatism?

Mancur Olson's Logic of Collective Action has provided the dominant framework for understanding the impact of encompassing unions and employers confederations on wage-setting in Western Europe. In particular, scholars have drawn upon Olson's writing to descripe corporatism as a means for attaining the collective goods of low unemployment and low inflation in highly unionized labor markets. The strongest impact of corporatist institutions in the labor market, however, was to generate greater wage equality rather than superior macroeconomic performance. To understand the most important impact of corporatist institutions, a new framework that emphasizes the effect of wage-setting institutions on the distribution of wages and salaries is needed. In this paper, we present one component of such a framework with a model that illustrates how both employers and unions might gain by central agreements that reduce wage inequality relative to the equilibrium wage distribution with decentralized wage-setting.Wage setting; unions and employers confederations; corporatist institutions