Michael Wallerstein, the Charlotte Marion Saden Professor of Political Science at Yale University, died on January 7, 2006, at his home in New Haven. He was just short of his 55th birthday. The cause was glioblastoma multiforme, a brain cancer.

In all of his scholarly endeavors, Michael Wallerstein sought to identify the conditions under which a society can achieve equality, material security, and justice. Deeply committed politically, Wallerstein was never derailed by ideological prejudice. He was the consummate scholar, never satisfied with his own answers. The intellectual puzzles he studied were motivated by some simple facts, and the answers he articulated used rigorous analytic tools. His intellectual influence was both substantive and methodological, thanks to his commitment to using formal and statistical tools of analysis to study important questions within comparative politics and political economy.

Wallerstein was born in Topeka, Kansas in 1951, and raised there and later in Marin County. His undergraduate education took place at Stanford University. He received his Ph.D. from the University of Chicago in 1985. During his graduate career, he crossed the intellectual gulf from political science to Chicago's economics department of Friedman, Stigler, Becker, and Lucas. His graduate work in both disciplines informed all of his later research.

While still a student at the University of Chicago, Wallerstein collaborated with his dissertation advisor, Adam Przeworski, in the study of the strategies of labor movements under democratic conditions. Their work was motivated by the Marxian puzzle that if workers were to gain political rights in the form of suffrage, they would use these rights to confiscate the rich. Capitalists, in response, would protect themselves by subverting democracy with arms. As a result, capitalism and democracy could not coexist.

Yet of course, they did, and Przeworski and Wallerstein authored a series of path-breaking papers that used formal tools of analysis to investigate why. They found that in a capitalist economy, where decisions to invest are a prerogative of the owners of capital, workers face a trade-off between redistribution and economic growth. Because future income depends on economic growth, it is rational for workers to moderate their redistributive demands. In turn, facing moderate demands, the bourgeoisie not only invests but can also live with democracy. As a result, a “democratic class compromise” naturally emerges, at least as long as everyone is sufficiently patient and the economy sufficiently productive.

Wallerstein's doctoral dissertation, which subsequently generated a series of articles, sought to explain the origin and structure of welfare states in small economies. In the spirit of the day, he observed that small economies could not hide behind trade barriers. In turn, in an economy open to trade, any monopolistic mark-up of wages above the world level would result in unemployment. Moreover, openness makes economies vulnerable to fluctuations in world demand. Hence, Wallerstein showed, small open economies must maintain wage discipline and develop an encompassing system of insurance against external shocks.

Most of Wallerstein's later intellectual life was devoted to the two themes he worked on while still a graduate student—namely, wage-setting institutions and the welfare state. Wage-setting institutions, Wallerstein gradually discovered, depended on the structure of trade unions, while an extensive welfare system required specific political institutions and was encouraged by left-wing partisan control of government. His ultimate aim was to understand “egalitarian institutions”: labor market and political institutions that in combination generate egalitarian outcomes and insure from random adversities.

Although Przeworski and Wallerstein's analysis of class compromise was purely theoretical, conducted at the level of “capitalist democracy,” it was obvious that the Scandinavian Social Democrats were more successful in advancing the welfare of wage-earners than socialist or non-socialist governments in other parts of the developed world. Thus was born Wallerstein's life-long fascination with Scandinavia, crystallized by the year he spent in Norway in 1989–1990, when he began a productive, long-term collaborative relationship with the Norwegian economist Karl Ove Moene.

After completing his graduate education, Wallerstein accepted a position at the University of California at Los Angeles, where he remained for 10 years. At the time, the UCLA political science department was in the process of building a strong group in political economy, of which Wallerstein was a central member. He was active in recruitment, and retained close and affectionate ties for the rest of his life with the political economy colleagues he had from his decade at UCLA.

At UCLA, much of Wallerstein's intellectual attention was devoted to empirical research on trade unions and collective bargaining that arose from his earlier theoretical work on wage setting institutions. In articles written in this period, Wallerstein documented empirically that smaller countries have higher rates of unionization and also that more centralized bargaining institutions promote wage restraint and greater wage equality. With funding from the National Science Foundation, he collaborated with Miriam Golden and Peter Lange of Duke University in collecting and assembling a dataset on unions and industrial relations in 16 OECD countries from 1950 to (ultimately) the year 2000. The project included coding a now widely-used index of wage bargaining centralization based on detailed information about institutions and labor-market organizations in OECD countries.

In 1994, Wallerstein accepted a position as professor of political science at Northwestern University. When he arrived at Northwestern, the department had a strong comparative politics group but only one formal modeler. Wallerstein helped correct the imbalance, and his presence in the department was instrumental in departmental hires over the next several years that attracted a group of young quantitative scholars. Wallerstein also served as chair of the department of political science at Northwestern between 1998 and 2001, a difficult time for the department that he navigated with a great deal of patience and goodwill.

While at Northwestern, Wallerstein's research broadened to the study of redistribution and inequality. The two rationales most commonly found to justify redistributing income are to alleviate poverty and to provide social insurance. Typically, the literature assumes one or the other motivation and explores its political feasibility and its implications for market efficiency within particular environments. In a series of papers coauthored with Karl Ove Moene, Wallerstein studied the interactions between the two motivations in a common framework. Assuming that individuals make both economic and political (voting) decisions in a self-interested, materially motivated, way, Moene and Wallerstein identified how these two motives interact to determine the mix and levels of policies designed to alleviate poverty and to insure against random shocks. In particular, they explored how changes in economic risk and in the distribution of individual talent, or (equivalently) the initial pre-intervention distribution of expected incomes affect the chosen mix and levels of poverty-reduction and insurance policies.

Their work explained one of the puzzles of redistribution in affluent countries: the welfare state is most generous in countries where wage differentials, before taxes and transfers, are small. To resolve this apparent paradox, they showed, theoretically and empirically, that welfare-state policies are better captured by an insurance logic than by a redistributive logic. Their work showed that in OECD countries, expenditures on social insurance against the loss of income due to unemployment, disability, sickness, and occupational injury rise as wage inequality declines.

Moene and Wallerstein worked together on a wide set of issues related to equity and stability of bargaining arrangements. They explained why local worker influence in Scandinavia and elsewhere is due to bargaining rights, and not to ownership rights, in spite of the great interest in worker-owned cooperatives on the part of early leaders of the labor movement. They explained why centralized wage bargaining produced a more egalitarian outcome than local wage bargaining or local worker ownership. They showed why unions affect the distribution of wages among workers far more than they alter the functional distribution of income between wages and profits.

Moene and Wallerstein concentrated much of their research efforts on the challenges that the egalitarian wage compression characteristic of Sweden and Norway (and to a lesser extent the other European countries) posed to economics. In Scandinavia such a solidaristic wage policy was initially adopted in the early 1950s and was pursued steadily for at least three decades. This policy called for the equalization of workers' pretax income by eliminating or reducing the wage differentials that existed between plants within the same industry, between industries, between regions, and ultimately between occupations. This is clearly the most dramatic instance of union-sponsored wage equalization in world.

Contrary to what many economists believed, Moene and Wallerstein demonstrated that one consequence of wage compression was higher output per worker without a reduction in employment. Wage compression generated an industrial structure with more investments in modern plants and more rapid abandonment of older plants—a faster rate of creative destruction—than would otherwise exist. Hence, wage equality generated overinvestment rather than underinvestment. Later on they extended the analysis to explain how wage compression led to more generous welfare spending.

In their several studies of the Scandinavian model of social democracy, Moene and Wallerstein insisted that Scandinavian distinctiveness arose from its high level of wage compression in the labor market. Many other features of the Scandinavian countries follow from the policy of wage equalization, including their generous and universal welfare spending and active labor market programs. In their view, Scandinavia is characterized by a set of complementary institutions and policies that fit together. They end by discussing Social Democracy as a development strategy.

In the final months of his life, Wallerstein worked on another set of interactions in the political economy of redistribution and welfare. Rather than consider various policies concerned with redistributing earned income, as he had in the papers written with Moene, Wallerstein turned to the interactions between policies that redistribute opportunities for earning income and policies that redistribute earned income from rich to poor. With David Austen-Smith, Wallerstein wrote a paper that built an equilibrium political economy model in which individuals are distinguished by an educational level and an ascriptive characteristic, such as race. No individual or firm in the model is motivated by any sort of (racial) prejudice. Nevertheless, due to presumed past prejudice, the racial minority is assumed to be relatively disadvantaged educationally as a group; thus the economic prospects of members of this group are less than those of a typical member of the racial majority. The reason for excluding prejudice is not that this is necessarily realistic, but that it permits identifying how (ex post) fiscal redistribution and (ex ante) affirmative action policies interact through the purely economic incentives facing people in society: different mixes of policy induce different incentives to create employment opportunities and different wage-schedules in the market, which in turn affect individuals' preferences over the policy mix itself. Among the results of Austen-Smith and Wallerstein's model are that the expected level of fiscal redistribution is lower when affirmative action is an available policy instrument relative to when it is not and that the skilled majority and the racial minority gain at the expense of the less skilled from having affirmative action available as a policy instrument.

It is characteristic of Wallerstein's research that he first eschewed invoking features such as altruism (although he certainly explored such motivations) and racial prejudice to build explanations for redistributive politics and economics. To do so up front, he felt, was to pre-judge what it was that really mattered for what we observe in the world. He preferred first to explore what happens in a world of purely self-interested and economically rational individuals. Doing this exposes the limits of such arguments when juxtaposed with the empirical world and reveals more clearly exactly what has to be included to provide adequate explanations for what we observe. This is a demanding program, and it is a testimony to Wallerstein's scholarship and intellect that he persisted in pursuing dispassionately when exploring issues on which he held strong normative convictions.

The last paper Wallerstein wrote, coauthored with Miriam Golden, was an empirical study of the determinants of wage inequality in OECD nations over two decades. The authors show that whereas in the 1980s strong unions and centralized bargaining structures protected workers from widening inequality, in the 1990s these institutions lost their effectiveness. Instead, trade with less-developed countries erodes wage equality in the final decade of the century. Even while completing that paper, Wallerstein was actively making notes for further empirical research on inequality.

Wallerstein's work was influential for the importance of the problems he studied, the meticulousness of his work, and the rigor of his analysis. The importance of his contributions was recognized when, just shortly prior to his death, he was elected to the American Academy of Arts and Sciences. He was also influential through his personal and professional relationships with colleagues and students. He was generous with his time, considered in his opinions, and kind in the spirit of his interactions. His presence was deeply valued in the institutions in which he worked, as well as in the many meetings he attended and intellectual groups in which he participated. In addition to his 2005 election to the American Academy, he served as scientific advisor for the Foundation for Research in Economics and Business Administration of Oslo, Norway in 1994–1995, as president of the APSA's Organized Section in Comparative Politics between 1999–2001, and as a member of the Scientific Committee of the Center for the Advanced Study in the Social Sciences of Madrid from 2001 until his death. He will be deeply missed by colleagues and friends across the globe.

In his honor, the Michael Wallerstein Award in Political Economy has been established by the American Political Science Association's Political Economy Section for the best article published in the field of political economy in a calendar year. The first award will be given at the 2006 APSA Annual Meeting.