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een higher in LMEs. The percentage of income inequality in CMEs like Sweden, Norway, Denmark and Finland was on an average of 23.2% during the 1990s whereas among the LMEs like Canada, Australia, UK, US the percentage of income inequality was on an average 31.1%. On the other hand the gross public expenditure spent on social protection in CMEs is higher than that of the LMEs. for instance among Sweden, Norway, Denmark and Finland it was 36.6% of GDP on an average during the 1990s. Whereas in Canada, Australia, UK and US it was only 21% of GDP on an average, that was spent on social protection. In CMEs trade unions negotiate and agree to restrain wages in exchange of social welfare, employment and taxation. Thus during the 1970s and early 1980s when inflation hit almost all the OECD countries CMEs provided employment restraining wages where as LMEs controlled inflation through restricting aggregate demand which in turn led to high unemployment and low productivity. Thus on an economic perspective CMEs can be viewed as a solution to reduce inflation or unemployment. However there was a considerable change in the IR systems in CMEs in the 1990s aiming at setting up agreements based on attaining greater flexibility in labour market to meet the demands of the competition. But still the impact on social equity and inflation remained the same. Many commentators have argued that CMEs institutional arrangement are better or the least bad solution for the partners during economic hard times.

Let’s consider the evidence from previous studies to illustrate that states that CMEs have outperformed LMEs in curtailing inflation, reducing unemployment and increasing productivity. Crepaz 1992 , Dell Aringa and Lodovici 1990 and Kitschelt et al 1999 analysed the period of 1980 to 1989 and found that CMEs had lowest unemployment rates during that period, increasing corporatism controlled inflation and unemployment and also CMEs had higher economic growth than LMEs. The following data has been drawn from the recent studies conducted to analyse the period of 1990 to 1999,

CMEs/LMEs

Countries

Unemployment

Rate %

GDP growth

Rate %

Productivity

Rate %

CME

Sweden

6.4

1.1

1.7

CME

Norway

4.9

3.1

1.9

LME

UK

7.9

2

1.2

LME

Canada

9.6

2.5

0.7

The recent data during 1990s show that the CMEs have had lower unemployment rates than the LMEs. CMEs like Sweden and Norway the rate of unemployment was 6.4% and 4.9% respectively where as LMEs like UK and Canada the rate of unemployment was 7.9% and 9.6% respectively. The productivity rate has also been 1.7% and 1.9% for Sweden and Norway where as in UK and Canada it was only 1.2% and 0.7% respectively. But there has not been much difference in the GDP rates considerably. Thus the recent data suggest that CMEs still have control over unemployment and productivity but considering the GDP it shows that the CMEs no longer out perform LMEs but it is still difficult to say to what extent this trend is likely to continue because these trends are cyclic in nature. Some cases it s considered th