EconPapers    
Economics at your fingertips  
 

Inequality, Technology and the Social Contract

Roland J. Benabou ()

No 4741, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The distribution of human capital and income lies at the center of a nexus of forces that shape a country’s economic, institutional and technological structure. I develop here a unified model to analyse these interactions and their growth consequences. Five main issues are addressed. First, I identify the key factors that make both European-style ‘welfare state’ and US-style ‘laissez-faire’ social contracts sustainable; I also compare the growth rates of these two politico-economic steady states, which are not Pareto-rankable. Second, I examine how technological evolutions affect the set of redistributive institutions that can be durably sustained, showing in particular how skill-biased technical change may cause the welfare state to unravel. Third, I model the endogenous determination of technology or organizational form that results from firms’ tailoring the flexibility of their production processes to the distribution of workers’ skills. The greater is human capital heterogeneity, the more flexible and wage-disequalizing is the equilibrium technology. Moreover, firms’ choices tend to generate excessive flexibility, resulting in suboptimal growth or even self-sustaining technology-inequality traps. Fourth, I examine how institutions also shape the course of technology; thus, a worldwide shift in the technology frontier results in different evolutions of production processes and skill premia across countries with different social contracts. Finally, I ask what joint configurations of technology, inequality and redistributive policy are feasible in the long run, when all three are endogenous. I show in particular how the diffusion of technology leads to the ‘exporting’ of inequality across borders; and how this, in turn, generates spillovers between social contracts that make it more difficult for nations to maintain distinct institutions and social structures.

Keywords: human capital; inequality; political economy; redistribution; skill bias; social contract; technical change; welfare state (search for similar items in EconPapers)
JEL-codes: D31 H10 J30 O33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev and nep-ltv
Date: 2004-11
References: Add references at CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=4741 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Chapter: Inequality, Technology and the Social Contract (2005) Downloads
Working Paper: Inequality, Technology, and the Social Contract (2004) Downloads
Working Paper: Inequality, Technology, and the Social Contract (2004) Downloads
Working Paper: Inequality, Technology, and the Social Contract (2003) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:cpr:ceprdp:4741

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=4741

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers
Address: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Series data maintained by ().

 
Page updated 2014-12-05
Handle: RePEc:cpr:ceprdp:4741