The Dilemma of Globalisation: A German Perspective
AbstractGlobalisation means gains from trade, but not for everyone. As gains from trade come along with factor price convergence, substantial fractions of the working classes in the high-wage countries of the West are likely to belong to the group of losers. In this situation it is tempting for the welfare state to help out, but the difficulties are enormous. On the one hand, the payment of social replacement incomes makes wages sticky, preventing the gains from trade, causing mass unemployment and turning the economies of the West into bazaars with excessive outsourcing and offshoring activities. On the other, the taxes needed for compensation payments to the working classes can hardly be levied from the mobile factors of production, given that globalisation has increased their mobility. This is a double dilemma for the welfare state. The paper discusses the possibilities of mitigating the dilemmas by paying wage subsidies for domestic residents and encouraging private savings so as to give workers a capital income in the future.
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Bibliographic InfoArticle provided by CEPII research center in its journal Economie Internationale.
Volume (Year): (2004)
Issue (Month): 100 ()
Globalisation; welfare state; wages;
Find related papers by JEL classification:
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
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- Viet Do & Ngo Van Long, 2007.
"International Outsourcing under Monopolistic Competition: Winners and Losers,"
CESifo Working Paper Series
2034, CESifo Group Munich.
- Ngo Van Long & Viet Do, 2007. "International Outsourcing under Monopolistic Competition: Winners and Losers," Departmental Working Papers 2007-06, McGill University, Department of Economics.
- Wolf-Heimo Grieben, 2006.
"Globalization with Labor Market Frictions and Non-Scale Growth,"
DEGIT Conference Papers
c011_053, DEGIT, Dynamics, Economic Growth, and International Trade.
- Wolf-Heimo Grieben, 2006. "Globalization with labor market frictions and non-scale growth," Working Papers of the Research Group Heterogenous Labor 06-09, Research Group Heterogeneous Labor, University of Konstanz/ZEW Mannheim.
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