Economic and social security in the twenty-first century, with attention to Europe

A partly heuristic attempt is made to explore long-run policies aimed at a second-best compromise between ex ante risk-sharing efficiency and ex post productive efficiency. Wage subsidies for low-skilled workers financed by t axes on high wages are advocated, together with improved risk sharing betwe en capital and labour, between generations and among the countries belongin g to EMU. The scope of the policies advocated is limited by considerations of moral hazard, time consistency and fiscal competition. Moreover, estimat es of some key economic parameters remain very imprecise. Several avenues o f further research are identified.