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Globalization and the Decline of the Welfare State in Less-Developed Countries

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Author Info
Nita Rudra
Abstract

Why have trends in government welfare spending in developing countries diverged from those in developed countries? I address this question by investigating the effects of capital and trade flows on government welfare spending in fifty-three developing countries. Using an original measure of labor power in developing countries, I test the links between international markets, labor's political strength, and the welfare state. I argue that labor's collective-action problems, caused by large populations of low-skilled and surplus workers, offset labor's potential political gains from globalization. I show that when the proportion of low-skilled workers in a nation is high, globalization will lead to a decline in welfare spending. Most significantly, the results suggest that in nations where labor-market institutions are not yet well developed, government social-welfare spending is constrained by international market forces. © 2001 The IO Foundation and the Massachusetts Institute of Technology

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Article provided by MIT Press in its journal International Organization.

Volume (Year): 56 (2002)
Issue (Month): 2 (April)
Pages: 411-445
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Handle: RePEc:tpr:intorg:v:56:y:2002:i:2:p:411-445

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  1. Axel Dreher & Jan-Egbert Sturm & Heinrich Ursprung, 2008. "The impact of globalization on the composition of government expenditures: Evidence from panel data," Public Choice, Springer, vol. 134(3), pages 263-292, March. [Downloadable!] (restricted)
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  2. Jonathan Perraton, 2004. "Joseph Stiglitz's, Globalization and its Discontents," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(6), pages 897-905. [Downloadable!]
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