Equality Multiplier

Erling Barth and Karl Moene have written an interesting paper entitled "The Equality Multiplier." They argue that states with less wage inequality (before transfers) generate political support for more generous social insurance while states with high wage inequality do not. They also show that states with more generous social insurance strengthen the position of low wage earners in wage negotiations and therefore generate more compressed wage distributions (i.e., less wage inequality). Together, these two mechanisms reinforce each other to generate what they call an equality multiplier. They test their theoretical model against OECD data. Very interesting work.