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Economic Discontent versus Social Commitment in Economic Development

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Author Info

  • Ruehl, Christof

    (Department of Economics, University of California, Los Angeles)

  • Vinogradov, Viatcheslav

    (Department of Mathematics and Mechanics, St.-Petersburg State University)

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    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.

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    File URL: http://www.ihs.ac.at/publications/eco/east/ro-36.pdf
    File Function: First version, 1996
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    Bibliographic Info

    Paper provided by Institute for Advanced Studies in its series East European Series with number 36.

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    Length: 25 pages
    Date of creation: Jul 1996
    Date of revision:
    Handle: RePEc:ihs:ihsrop:36

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    Postal: Institute for Advanced Studies - Library, Stumpergasse 56, A-1060 Vienna, Austria

    Related research

    Keywords: Economic Development; Growth Theory; Transition Economies;

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    Cited by:
    1. World Bank, 2005. "Russian Federation : From Transition to Development, A Country Economic Memorandum for the Russian Federation," World Bank Other Operational Studies 8628, The World Bank.

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