Conclusion

This chapter offers a new, unified model to analyze the reciprocal interactions between the distribution of human wealth, technology, and redistributive institutions. It identifies in particular certain core mechanisms that allow alternative societal models to persist, as well as powerful forces pushing towards uniformization.

Key among the former is the interplay of imperfections in asset markets and in the political system that can lead to multiple steady states where inequality and redistribution are negatively correlated. Among the latter is skill-biased technical change, which can potentially lead to the unraveling of the Welfare State. When technological or organizational form is endogenous, moreover, firms respond to greater human capital heterogeneity with more flexible technologies, further exacerbating income inequality. The possibility for firms in different countries to thus choose technologies adapted to the local labor force can also make it easier to sustain multiple social models. The international diffusion of technology, however, implies that the more flexible, skill-biased technologies profitably developed in nations with greater inequality and less redistributive institutions may then be imitated by firms in other countries, thereby triggering a “chain reaction” that moves the whole system towards a common outcome that is more inegalitarian - technologically, economically and politically speaking. Such international spillovers between national social contracts are important concerns in the debate over globalization, and warrant further research.

<< | >>

↑

Source: Aghion Philippe, Durlauf Steven N. (eds.). Handbook of Economic Growth. Volume 1. Part B.North-Holland,2005. — p. 1061-1822. 2005

More economic literature on Economics.Studio

Conclusion

More on the topic Conclusion: