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Globalisation squeezes the public sector - is it so obvious?

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Author Info
Torben M. Andersen
Allan Sørensen () (School of Economics and Management, University of Aarhus, Denmark)

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Abstract

It is widely perceived that globalization squeezes public sector activities by making taxation more costly. This is attributed to increased factor mobility and to a more elastic labour demand due to improved scope for relocation of production and thus employment across countries. We argue that this consensus view overlooks that gains from trade unambiguously work to lower the marginal costs of public funds, and moreover that globalization via increased trade in intermediaries may actually lower the labour demand elasticity.

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Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2008-08.

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Length: 13
Date of creation: 01 Sep 2008
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Handle: RePEc:aah:aarhec:2008-08

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Related research
Keywords: Globalization; marginal costs of public funds; labour taxation;

Find related papers by JEL classification:
F15 - International Economics - - Trade - - - Economic Integration
F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
H40 - Public Economics - - Publicly Provided Goods - - - General

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  1. Chen, Hogan & Kondratowicz, Matthew & Yi, Kei-Mu, 2005. "Vertical specialization and three facts about U.S. international trade," The North American Journal of Economics and Finance, Elsevier, vol. 16(1), pages 35-59, March. [Downloadable!] (restricted)
  2. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and Productivity in International Trade," Boston University - Institute for Economic Development 105, Boston University, Institute for Economic Development. [Downloadable!]
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  3. Skaksen, Mette Yde & Sorensen, Jan Rose, 2001. "Should trade unions appreciate foreign direct investment," Journal of International Economics, Elsevier, vol. 55(2), pages 379-390, December. [Downloadable!] (restricted)
  4. Jörn Kleinert, 2003. "Growing Trade in Intermediate Goods: Outsourcing, Global Sourcing, or Increasing Importance of MNE Networks?," Review of International Economics, Blackwell Publishing, vol. 11(3), pages 464-482, 08. [Downloadable!] (restricted)
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  5. Molana, Hassan & Montagna, Catia, 2006. "Aggregate scale economies, market integration, and optimal welfare state policy," Journal of International Economics, Elsevier, vol. 69(2), pages 321-340, July. [Downloadable!] (restricted)
    Other versions:
  6. Molana, Hassan & Montagna, Catia, 2007. "Expansionary effects of the welfare state in a small open economy," The North American Journal of Economics and Finance, Elsevier, vol. 18(3), pages 231-246, December. [Downloadable!] (restricted)
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  7. Slaughter, Matthew J., 2001. "International trade and labor-demand elasticities," Journal of International Economics, Elsevier, vol. 54(1), pages 27-56, June. [Downloadable!] (restricted)
  8. Mine Zeynep Senses, 2006. "The Effects of Outsourcing on the Elasticity of Labor Demand," Working Papers 06-07, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  9. Arvind Panagariya, 2003. "Trade Openness: Consequences for the Elasticity of Demand for Labor and Wage Outcomes," International Trade 0308007, EconWPA. [Downloadable!]
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