Inequality and Employment

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Series Details Vol.47, No.5, September-October 2012, p282-291
Publication Date September 2012
ISSN 0020-5346
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Natural rate theory has dominated interpretations of economic trends and policy prescriptions over many decades, as economists contrasted high unemployment and lower inequality in Europe with the great American job machine.

This paper discusses the relationship between skill structure and wage distributions and investigates the claim that inequality creates incentives which facilitate human capital formation. The big tradeoff between efficiency and inequality is dismissed as a fallacy, as it is demonstrated that redistribution lays the foundation for human capital investment rather than impeding it.

[Full text of articles can be found in the Intereconomics Archive two years after the initial publication]

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