Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/27084 
Authors: 
Year of Publication: 
2005
Series/Report no.: 
Arbeitspapiere für Staatswissenschaft No. 16
Publisher: 
Universität Hamburg, Department Wirtschaft und Politik, Hamburg
Abstract: 
The 'big trade-off', described by Arthur Okun some thirty years ago, is back again. Equality or efficiency, or to put it differently again: modern highly developed economies and societies have to choose between the Scylla of income inequality or the Charybdis of unemployment. Furthermore, it looks like the continental European economies - foremost Germany and France - sided with more egalitarian ends accepting higher unemployment whilst the liberal economies such as the United States and the United Kingdom choose higher inequality for lower unemployment. In this paper it is argued, that the trade-off is not a supply-side necessity to maintain work effort in a situation of incomplete contracts, but is a politico-economic issue of particular interest groups to seek rents. However, unlike in Mancur Olson's seminal approach, it is not the trade unions which are forming distributional coalitions on the labour market but rather the meritoracy which is happy to use Keynesian-type demand management in order to advance their material interests by pursuing a 'Meritocratically Optimal Rate of Unemployment' (MORU).
Subjects: 
Unemployment
Income inequality
Political Economy
JEL: 
E12
E24
E25
P16
P51
Document Type: 
Working Paper

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