Designing a Capitalist Economy for Fast Growth and High Employment in Today's Globalized World Economy

Journal of Applied Economics, Vol. 1, pp. 87-103, November 1998

Posted: 18 May 2004

See all articles by Edmund S. Phelps

Edmund S. Phelps

Center on Capitalism and Society, Columbia University

Abstract

The paper begins with a consideration of the hypothesis that public sector employment is a means to reduce the general unemployment rate. It then takes up the proposition that subsidizing domestic investment is an effective way to reduce unemployment. The rest of the paper addresses some of the questions arising about employment subsidies as a means to reduce unemployment. A crucial question is the best way to finance an employment subsidy. Is it a payroll tax? a Value Added Tax? if enforceable, some sort of tax on wealth or non-wage income? Or is the best answer a cutback in welfare entitlements - in social wealth - which would permit the introduction of employment subsidies without widening the budgetary deficit. The paper goes on to consider the hypothesis that, in the medium term and beyond, the best remedy is a cut of tax rates (on labor, possibly on domestic capital) financed by the same cutback in welfare entitlements.

Suggested Citation

Phelps, Edmund S., Designing a Capitalist Economy for Fast Growth and High Employment in Today's Globalized World Economy. Journal of Applied Economics, Vol. 1, pp. 87-103, November 1998. Available at SSRN: https://ssrn.com/abstract=547323

Edmund S. Phelps (Contact Author)

Center on Capitalism and Society, Columbia University ( email )

420 W. 118th Street
New York, NY 10027
United States
212-854-2060 (Phone)
212-854-8059 (Fax)

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