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Economic Discontent versus Social Commitment in Economic Development

Author

Listed:
  • Ruehl, Christof

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

  • Vinogradov, Viatcheslav

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

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.

Suggested Citation

  • Ruehl, Christof & Vinogradov, Viatcheslav, 1996. "Economic Discontent versus Social Commitment in Economic Development," East European Series 36, Institute for Advanced Studies.
  • Handle: RePEc:ihs:ihsrop:36
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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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    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.

    More about this item

    Keywords

    Economic Development; Growth Theory; Transition Economies;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • P17 - Economic Systems - - Capitalist Systems - - - Performance and Prospects

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