Tackling Inequality

Richard Layard is one of Britain's foremost applied economists whose work has had a profound impact on the policy debate in Britain and abroad. This book contains his most influential articles on education and inequality, and on the lessons of economic transition in Eastern Europe. It is published along with a companion volume, Tackling Unemployment. The two most obvious ways of tackling inequality are through education and by redistributing cash. But in each case we need to weigh up the gain in equality against any loss of efficiency which may result. Layard shows how to do this. He focuses on lifetime incomes as the natural basis for thinking about inequality, and shows how lifetime incomes are affected by education. Viewed in the context of lifetime rather than annual income, education is a more powerful tool when compared with cash redistribution. Layard also looks at the efficiency cost of cash redistribution by investigating how taxes affect people's work effort - especially the labour supply of women. However, he argues that to some extent people's efforts to better themselves through hard work are self-defeating. If each person tries to do better than his neighbour, they cannot all succeed. If redistributive taxation reduces this kind of fruitless effort, its efficiency cost is less than might appear. Other essays cover the hypotheses that 'screening' encourages over-education, that universities under-teach, and that the new media will make existing teaching methods obsolete. The final essays cover the experience of post-communist reform - privatisation, stabilisation and restructuring - and the key issue of why the reform has caused so much pain.