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International Integration and the Welfare State

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  • Torben M. Andersen

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    (Department of Economics, University of Aarhus, Denmark)

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    Abstract

    This paper discusses how international integration affects the need and scope for welfare state activities. The first part reviews the main mechanisms, which have been considered in the literature, namely, tax base mobility, risk and race to the bottom effects in welfare policies. The second part considers in more detail the implications that arise via labour market effects, and it is argued that the latter are crucial since product market integration affects the mobility of jobs, even though labour mobility across nations remains small. This may in turn have important consequences for the financing of welfare state activities through taxes levied on labour, but also the need for welfare state activities. The paper ends by discussing some policy options.

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    File URL: ftp://ftp.econ.au.dk/afn/wp/02/wp02_2.pdf
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    Bibliographic Info

    Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2002-2.

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    Length: 37
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    Handle: RePEc:aah:aarhec:2002-2

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    Web page: http://www.econ.au.dk/afn/

    Related research

    Keywords: Risk; welfare policies; taxation; globalisation;

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    References

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    1. Alberto Alesina & Romain Wacziarg, 1997. "Openness, Country Size and the Government," NBER Working Papers 6024, National Bureau of Economic Research, Inc.
    2. Burda, Michael C., 1999. "European labor markets and the Euro: How much flexibility do we really need?," SFB 373 Discussion Papers 1999,41, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    3. Holmlund, Bertil & Kolm, Ann-Sofie, 1999. "Economic Integration, Imperfect Competition, and International Policy Coordination," Working Paper Series 1999:7, Uppsala University, Department of Economics.
    4. Danthine, Jean-Pierre & Hunt, Jennifer, 1992. "Wage Bargaining Structure, Employment and Economic Integration," CEPR Discussion Papers 694, C.E.P.R. Discussion Papers.
    5. Robert J. Flanagan, 1999. "Macroeconomic Performance and Collective Bargaining: An International Perspective," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1150-1175, September.
    6. Joeri Gorter & A. Parikh, 2000. "How mobile is capital within the European Union?," CPB Research Memorandum 172, CPB Netherlands Bureau for Economic Policy Analysis.
    7. Richard E. Baldwin & Paul Krugman, 2002. "Agglomeration, Integration and Tax Harmonization," NBER Working Papers 9290, National Bureau of Economic Research, Inc.
    8. Daveri, Francesco & Tabellini, Guido, 1997. "Unemployment, Growth and Taxation in Industrial Countries," CEPR Discussion Papers 1681, C.E.P.R. Discussion Papers.
    9. Robin L. Lumsdaine & Eswar Prasad, 1999. "Identifying the Common Component in International Economic Fluctuations," IMF Working Papers 99/154, International Monetary Fund.
    10. Alesina, Alberto & Perotti, Roberto, 1997. "The Welfare State and Competitiveness," American Economic Review, American Economic Association, vol. 87(5), pages 921-39, December.
    11. Fatás, Antonio & Mihov, Ilian, 1999. "Government Size and Automatic Stabilizers: International and Intranational Evidence," CEPR Discussion Papers 2259, C.E.P.R. Discussion Papers.
    12. A. B. Atkinson, 1999. "The Economic Consequences of Rolling Back the Welfare State," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011719, December.
    13. Lars Calmfors, 1993. "Centralisation of Wage Bargaining and Macroeconomic Performance: A Survey," OECD Economics Department Working Papers 131, OECD Publishing.
    14. Frankel, Jeffrey A & Rose, Andrew K, 1996. "The Endogeneity of the Optimum Currency Area Criteria," CEPR Discussion Papers 1473, C.E.P.R. Discussion Papers.
    15. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-42, December.
    16. Perotti, Roberto & Alesina, Alberto, 1997. "The Welfare State and Competitiveness," Scholarly Articles 4553027, Harvard University Department of Economics.
    17. Karen K. Lewis, 1999. "Trying to Explain Home Bias in Equities and Consumption," Journal of Economic Literature, American Economic Association, vol. 37(2), pages 571-608, June.
    18. Torben M. Andersen & Niels Haldrup & Jan Rose Sørensen, 2000. "Labour market implications of EU product market integration," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 105-134, 04.
    19. Jan K. Brueckner, 1999. "Welfare Reform and the Race to the Bottom: Theory and Evidence," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 505-525, January.
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