Human Capital, Technical Change, and the Welfare State

Roland Benabou

Journal of the European Economic Association, 2003, vol. 1, issue 2-3, 522-532

Abstract: I study the interactions between the distribution of human capital, technological choice, and redistributive institutions. I first ask what makes alternative social contracts such as a European-style "welfare state" and U.S.-style "laissez-faire" sustainable, and in particular how each is affected by skill-biased technical change. I then endogenize technological or organizational choice, and show that firms respond to greater human capital heterogeneity with more flexible technologies that further exacerbate wage equality. I then analyze the simultaneous determination of technology, income distribution, and redistributive institutions, and as well as spillovers between the social contracts of different countries. (JEL: D31, O33, J3, H10) Copyright (c) 2003 The European Economic Association.

Date: 2003
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