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Globalization And Social Spending

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  • Paul DeGrauwe
  • Magdalena Polan

Abstract

We provide evidence indicating that countries with well developed social security systems do not necessarily face a trade-off between social spending and competitiveness. On average, countries that spend a lot on social needs score well in the competitiveness league. We investigate the importance of a reverse causality from competitiveness to social spending, and find that this is weak. We also present some possible explanations for our empirical finding. Finally, we interpret our findings in the framework of a theoretical model in which risk affects the size of the social sector and social spending affects the production function of the private sector. Copyright 2005 Blackwell Publishing Ltd

Suggested Citation

  • Paul DeGrauwe & Magdalena Polan, 2005. "Globalization And Social Spending," Pacific Economic Review, Wiley Blackwell, vol. 10(1), pages 105-123, February.
  • Handle: RePEc:bla:pacecr:v:10:y:2005:i:1:p:105-123
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    Cited by:

    1. Vesna Stavrevska, 2011. "The efficiency wages perspective to wage rigidity in the open economy: a survey," International Journal of Manpower, Emerald Group Publishing, vol. 32(3), pages 273-299, June.
    2. Rovelli, Riccardo & Bruno, Randolph Luca, 2007. "Labor Market Policies and Outcomes: Cross Country Evidence for the EU-27," IZA Discussion Papers 3161, Institute for the Study of Labor (IZA).
    3. Jon Olaskoaga-Larrauri & Ricardo Aláez-Aller & Pablo Díaz-de-Basurto, 2010. "Measuring is Believing! Improving Conventional Indicators of Welfare State Development," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 96(1), pages 113-131, March.
    4. Tim Krieger & Daniel Meierrieks, 2010. "Terrorism in the Worlds of Welfare Capitalism," Journal of Conflict Resolution, Peace Science Society (International), vol. 54(6), pages 902-939, December.

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