Labour Market Theory

Wage inequality, redistribution and international trade

Lecture 2nd/ 3rd semester

Master in International Economics & Public Policy (MIEPP)

Lecturer: Klaus Wälde

Tutorial: Hoang Van Khieu

Many individuals are concerned about large and potentially rising inequalities in modern societies. After looking at facts about inequality in OECD countries, the first part of the lecture asks and offers explanations from the modern labour market literature why there is wage inequality - i.e. why wage income differs across individuals. The second part continues by studying principles of taxation and shows how tax systems affect and help to reduce inequality. The third part applies these insights and studies one channel how trade implies economy wide gains from trade and creates real winners and losers. It also shows how a tax system would have to look like such that Pareto-improving gains from trade would be observed - everybody would gain from trade. Part IV summarizes and provides an outlook to redistribution beyond the tax system.

The slides used in the lecture are made available in the JGU Reader. An overview is here.

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Sueddeutsche Zeitung (28.07.2014)

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