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

A partly heuristic attempt at exploring 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 taxes on high wages are advocated, together with improved risk sharing between capital and labour, between generations and between the countries belonging to EMU. The scope of the advocated policies is limited by considerations of moral hazard, time consistency and fiscal competition. Also, estimates of some key economic parameters remain very imprecise. Several avenues of further research are identified.