Economic Discontent versus Social Commitment in Economic Development

Christof Ruehl and Viatcheslav Vinogradov
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Christof Ruehl: Department of Economics, University of California, Los Angeles
Viatcheslav Vinogradov: Department of Mathematics and Mechanics, St.-Petersburg State University

No 36, East European Series from Institute for Advanced Studies

Abstract: The paper investigates the role of social cohesion in economic development. We capture 'social cohesion' as society's willingness to accept lower wages to increase employment, and as its willingness to offer benefit payments to the unemployed. The lower the minimum wage rate and the higher the welfare payments, the more cohesive the society, and vice versa. We compare two economies which differ only in this respect. We analyze how they react to shocks of different magnitudes. We show that for minor disturbances the less cohesive economy exhibits superior performance, while the reverse becomes true as the size of the shock increases. The Central and Eastern European transition economies exemplify the argument.

Keywords: Economic Development; Growth Theory; Transition Economies (search for similar items in EconPapers)
JEL-codes: E24 O11 P17 (search for similar items in EconPapers)
Pages: 25 pages
Date: 1996-07
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Citations: View citations in EconPapers (1)

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