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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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    1. Alberto Alesina & Roberto Perotti, 1994. "The Welfare State and Competitiveness," NBER Working Papers 4810, National Bureau of Economic Research, Inc.
    2. Alberto Alesina & Romain Wacziarg, 1997. "Openness, Country Size and the Government," NBER Working Papers 6024, National Bureau of Economic Research, Inc.
    3. 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.
    4. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-25, July.
    5. 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.
    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. 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.
    8. Perotti, Roberto & Alesina, Alberto, 1997. "The Welfare State and Competitiveness," Scholarly Articles 4553027, Harvard University Department of Economics.
    9. Daveri, Francesco & Tabellini, Guido, 1997. "Unemployment, Growth and Taxation in Industrial Countries," CEPR Discussion Papers 1681, C.E.P.R. Discussion Papers.
    10. 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.
    11. Richard Baldwin; Paul Krugman, 2001. "Agglomeration, Integration and Tax Harmonization," IHEID Working Papers 01-2001, Economics Section, The Graduate Institute of International Studies.
    12. Robin L. Lumsdaine & Eswar Prasad, 1999. "Identifying the Common Component in International Economic Fluctuations," IMF Working Papers 99/154, International Monetary Fund.
    13. 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.
    14. 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.
    15. Lars Calmfors, 1993. "Centralisation of Wage Bargaining and Macroeconomic Performance: A Survey," OECD Economics Department Working Papers 131, OECD Publishing.
    16. Holmlund, B. & Kolm, A.-S., 1999. "Economic Integration, Imperfect Competition, and International Policy Coordination," Papers 1999:7, Uppsala - Working Paper Series.
    17. Jean-Pierre DANTHINE & Jennifer HUNT, 1992. "Wage Bargaining Structure, Employment and Economic Integration," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9204, Université de Lausanne, Faculté des HEC, DEEP.
    18. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-42, December.
    19. Fatás, Antonio & Mihov, Ilian, 1999. "Government Size and Automatic Stabilizers: International and Intranational Evidence," CEPR Discussion Papers 2259, C.E.P.R. Discussion Papers.
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