November 28, 2000
Why We Don't Have to Choose between Social Justice and Economic Growth: The myth of the equity/efficiency trade-off
This paper was prepared for the National Policy Conference, 2000 and was also presented at an Industry Canada Seminar in September 2000. An earlier version was presented to the 2000 Annual Meetings of the Canadian Economics Association and to the Studies in Political Economy/Douglas-Coldwell Conference, "The Left in a Post-It World," held at Carleton University. In addition to useful comments received at these events, I would like to acknowledge the particularly important contributions to my thinking on growth and inequality issues provided by Bob Baldwin, Director of Social and Economic Policy with the Canadian Labour Congress; Andrew Sharpe, Executive Director of the Centre for the Study of Living Standards; John Evans of the Trade Union Advisory Committee to the OECD; and Rianne Mahon of Carleton University.
1Arthur Okun. Equality and Efficiency: The Big Trade-off. Washington: Brookings Institution, 1975. p.1
2Michael Wolfson and Brian Murphy. "New Views on Income Inequality Trends in Canada and the United States," in Monthly Labor Review, April 1998.
3Lawrence Mishel, Jared Bernstein and John Schmitt. State of Working America, 1998-99. Ithaca, NY: ILR Press for the Economic Policy Institute,1999.
4Statistics Canada. Income in Canada, Catalogue No. 75-202, Tables 7.2 and 7.3.
5David Ross, Katherine Scott and Peter Smith. The Canadian Fact Book on Poverty 2000. Ottawa: Canadian Council on Social Development, 2000, and Andrew Jackson and David Robinson. Falling Behind: The State of Working Canada, 2000. CCPA, 2000.
6Phillipe Aghion, Eve Caroli and Cecilia Garcia-Penalosa. "Inequality and Economic Growth: The Perspective of the New Growth Theories," in Journal of Economic Literature, Vol. XXXVII, December 1999, pp. 1615-1660.
7Andrew Jackson. "Tax Cuts: The Implications for Growth and Productivity," in Canadian Tax Journal, Vol. 48, No. 2, 2000.
8Per Kongshoj Madsen. Denmark: Flexibility, Security and Labour Market Success. International Labour Organization, Employment and Training Paper #53, 1999.
9OECD. "Economic Performance and the Structure of Collective Bargaining," in Employment Outlook, 1997 and "Earnings Inequality and Mobility," in Employment Outlook, 1996.
10See Andrew Jackson and Grant Schellenberg. "Unions, Collective Bargaining and Labour Market Outcomes for Canadian Working Women: Past Gains and Future Challenges," in Richard P. Chaykowski and Lisa M. Powell (Eds.) Women and Work. John Deutsch Institute, Queen's University, 1999.
11A League Table of Poverty in Rich Countries. UNICEF, 2000
12 ILO. World Employment Report 1995, Part 4, as well as Jonathan Michie and John Grieve Smith (Eds.) Unemployment in Europe. San Diego: Academic Press, 1994.
13Allan Larsson. "Social Protection and Economic Performance," in David Foden and Peter Morris (Eds.) The Search for Equity: Welfare and Security in the Global Economy. Lawrence and Wishart and ETUI/UNISON, 1998.
14Willem Adema and Marcel Einerhand. "The Growing Role of Private Social Benefits," OECD Labour Market and Social Policy Occasional Paper No. 32, 1998.
15Willi Leibfritz, John Thornton and Alexandra Bibbee. Taxation and Economic Performance, OECD Economics Department, Working Paper No. 176, 1997.
16Philip Gerson. "The Impact of Fiscal Policy Variables on Output Growth" IMF Working Paper WP/98/1. www.imf.org
17 Lars Osberg and Zhengxi Lin. "How Much of Canada's Unemployment is Structural?" Conference on Structural Aspects of Unemployment, 1999. www.csls.ca
19Lars Osberg. "The Equity/Efficiency Trade-off in Retrospect," in Canadian Business Economics, Vol. 3, No. 3, Spring 1995, pp. 5-19.
20Par Hannsson and Magnus Henrekson. "A New Framework for Testing the Effect of Government Spending on Growth and Productivity," in Public Choice, December 1994, pp.381- 401.
21See David Ross and Paul Roberts. Income and Child Well-Being: A New Perspective on the Poverty Debate. Ottawa: CCSD, 1999.
22Literacy in the Information Age. OECD and Statistics Canada, 2000.
23Paul Cashin. "Government Spending, Taxes and Economic Growth" IMF Working Paper WP/94/92, 1994. www.imf.org
24For empirical work on the links from "social cohesion" to growth, see Alberto Alesina and Dani Rodrik, Distributive Politics and Economic Growth. NBER Working Paper 3668, 1991; Stephen Knack and Philip Keefer, "Does Social Capital Have An Economic Payoff?" in Quarterly Journal of Economics, Vol. 112, No. 4, November 1997.
25 Lars Osberg. "Unemployment Insurance and Unemployment Revisited" in Lars Osberg and Brian MacLean (Eds.) The Unemployment Crisis: All for Naught. McGill-Queen's University Press, 1996.
26 See Madsen, Chapter 5.
27See Jelle Visser and Anton Hemerijk, A Dutch Miracle: Job Growth, Welfare Reform and Corporatism in the Netherlands. Amsterdam University Press, 1997.
28Peter Auer. Employment Revival in Europe: Labour Market Success in Austria, Denmark, Ireland and the Netherlands. Geneva: ILO, 2000. The ILO has also published detailed case studies on each of these countries, available at www.ilo.org under Employment and Training Papers.
29L. Mishel, J. Bernstein, and J. Schmitt. The State of Working America, 1998-99. Economic Policy Institute and Cornell University Press, 1999, pp. 65-70.
30For a detailed and balanced exposition on constraints and options for active macro-economic policy, see Dean Baker, Gerry Epstein and Robert Pollin (Eds.) Globalization and Progressive Economic Policy, Cambridge University Press, 1999.
31See Paul Hirst and Grahame Thompson. Globalization in Question. Polity Press, 1999.
32 Richard Freeman and Lawrence Katz. "Rising Wage Inequality: The United States vs Other Advanced Countries" in Richard Freeman (Ed.) Working Under Different Rules. New York: Russell Sage Foundation, 1993.
33See Harmful Tax Competition: An Emerging Global Issue. OECD, 1998.
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