Expansionary Effects of the Welfare State in a Small Open Economy
AbstractWe examine the relationship between welfare state policies and economic performance in a small open economy with (i) free trade in final goods and international capital mobility, and (ii) aggregate increasing returns to scale. Contrary to the conventional wisdom, we find that a retrenchment of welfare programmes is not an inevitable consequence of economic integration. Instead, by improving the exploitation of aggregate scale economies, social expenditure policies and international openness complement each other in facilitating an improvement in economic performance that can sustain a more generous welfare protection.
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Bibliographic InfoPaper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Conference Paper Series with number 0505.
Date of creation: Oct 2005
Date of revision:
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Postal: Department of Economics, University of St. Andrews, Fife KY16 9AL
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Welfare state; circular causation; international trade; capital mobility.;
Other versions of this item:
- 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.
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- F1 - International Economics - - Trade
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
- J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-12-01 (All new papers)
- NEP-INT-2005-12-01 (International Trade)
- NEP-PBE-2005-12-01 (Public Economics)
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