The Welfare State Revisited by José Antonio Ocampo

Author:José Antonio Ocampo
Language: eng
Format: epub
Tags: POL023000, Political Science/Political Economy, POL019000, Political Science/Public Policy/Social Services & Welfare
Publisher: Columbia University Press
Published: 2018-03-27T04:00:00+00:00

NOTES

1. As a notable example of a result of the so-called five presidents report, there is an ongoing process to develop a social pillar for Economic and Monetary Union countries (see Juncker et al. 2015), and the objective is stated as: “Europe’s aim should be to earn a ‘social triple A,’ ” and “I will want to develop a European Pillar of Social Rights, which takes account of the changing realities of the world of work and which can serve as a compass for the renewed convergence within the euro area” (President Juncker, State of the Union, 9 September 2015).

2. This discussion has recently been revived by Piketty (2014). It is beyond the scope of this chapter to discuss the functional distribution of income. It should be noted, though, that the text discuss human capital and its distribution, a form of capital that is important in accounting for wealth and its distribution and that is not featured in the discussion raised by Piketty (2014). Wages and salaries are quantitatively of much larger importance than capital income for the distribution of disposable income (see, for example, OECD 2012b).

3. Consider the following very stylized way of thinking of the problem. Disposable income for household i is given as , where τ(yi) is the net tax payment made given market income yi, 1 > τ′ > 0, τ″ ≥ 0. Disposable income is given by d(yi), where 0 < d′ = 1 – τ – τ′ yi < 1, and d″ = –2τ′ – τ″yi < 0. Let market income be given as yi = w(hi), where hi denotes human capital by type i and w(hi) gives the wage as a function of human capital, w′ > 0. It follows that

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