There is a big trade-off between equality and efficiency according to mainstream economists. From a socio-economic point of view, however, it depends upon circumstances and the precise definition of equality and efficiency. The paper shows that in special situations equality is even a precondition for more efficiency. In an extended transaction cost theory, four types of the employment relationship are developed: markets, hierarchies, social networks, and civil rights. While in markets and hierarchical regimes equality may affect efficiency negatively, social networks and civil right regimes (entitlement) are characterized by egalitarian principles compatible with or even complementary to efficiency. Indeed, market regimes are not superior in any case. The study identifies the context conditions under which the four employment regimes are most effective.
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