Re: Full Employment is what?

[Sven R Larson <larson@xxxxxx>]

"William F. Hummel" wrote:
>
> Voluntary ELR with guaranteed income seems like a prescription
> for a gradual opting out of the workforce.  Of course it would
> depend on the amount of guaranteed income relative to the minimum
> acceptable income of the private sector work force.  But surely
> there is a danger of a losing in the price competition in a world
> of free trade.  It may take a long time, but the elements would
> appear to be in place for a downward trend in economic growth and
> (average) standard of living.  I have to wonder whether the
> European experience is truly supportive of your thesis.

Persson & Tabellini (AER '95) shows that economic growth correlates
positively with even distribution of income in small open economies.
They do not take welfare into account, but it's not a very dramatic move
to suggest that generous welfare programs make similar contributions.
(The opposite extension of their argument would be a bolder move.) If
increased remuneration with effort is significant to workers, then in
the end it would be hard to explain P&T's results. Also, it would be
hard to explain, e.g., why Denmark, where welfare is comparatively
generous and workfare institutions are rare, still has one of the lowest
unemployment rates in the industrialized world. You can find similarly
illustrative examples elsewhere in Europe where more or less harsh
workfare regimes have walked hand in hand with comparatively low growth
and high unemployment. Just look country by country. It's actually very
interesting.

/srl

--
Sven R Larson
PhD; Assistant professor of economics
Department of Social Sciences, Bldg. 22.2
Roskilde University
Pb 260
DK-4000 Roskilde, Denmark
Phone: (+45) 4674 2910