The foundations for the more recent success of the Irish economy were laid as far back as the 1960s with the promotion of closer integration with the international economy and the investment in education, according to the ESRI.

Fiscal stabilisation, the opening up of Ireland to the outside world, investment in education, foreign direct investment and social partnership have been widely seen as key factors in the Republic's recent economic transformation, the institute said in the book Bust to Boom? The Irish Experience of Growth and Inequality, presented yesterday to mark its 40th anniversary.

Social partnership has been central in helping to lay the foundations for the boom following the fiscal crisis, mass unemployment and renewed emigration of the 1980s.

It prioritised economic competitiveness, macro-economic stability and employment, though with a commitment to maintaining a minimum level of social protection for the most vulnerable, according to the ESRI.

Tax cuts have secured wage moderation and there has been a dramatic decline in public spending. This has been accompanied by an unprecedented growth in employment, it said.

Complex shifts in the distribution of earnings and income have accompanied this growth, says ESRI. There was a substantial widening in earnings inequality, with rapid increases at the top of the distribution, but this did not lead to a more unequal distribution of income among households, it said.

But with the emergence of rising wage pressure following from full employment, the institutions of social partnership are likely to come under increasing strain, the ESRI warned. Irish society and the institutions of social partnership are now confronted with fundamental questions about the distribution of the fruits of growth, as well as the appropriate balance between market and social wages, it said, adding that the manner in which these issues are tackled will be crucial to the continued sustainability of the Irish model.