Equality and Efficiency: Policy for Globalisation

Policy responses to increasing wage inequality in advanced countries are considered. Protection is argued to be a means of diverting resources to appease particular interest groups at net cost to society. A social security system is shown to damp the effects of increased inequality at the cost of aggravated unemployment. Reforms linking benefits more firmly to work are shown to reduce unemployment and, in the presence of learning from experience, to raise productivity and reduce overall inequality.