IDEAS home Printed from https://ideas.repec.org/a/kap/openec/v18y2007i1p95-118.html
   My bibliography  Save this article

Welfare State, Market Imperfections, and International Trade

Author

Listed:
  • Hassan Molana
  • Catia Montagna

Abstract

Within a two-sector-two-country model of trade with aggregate scale economies and unionisation, a more generous welfare state in one country increases welfare in that country and can have positive spillover effects on the other. Furthermore, synchronised expansions of social security are more welfare enhancing than unilateral ones. Our results counter the fears that a race to the bottom in social standards may result from the ‘shrinking-tax-base’ entailed by international capital mobility. While affecting trade patterns and income distribution, capital mobility interacts with welfare state policies in increasing welfare, even when capital flows out of the country that initiates the shock. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Hassan Molana & Catia Montagna, 2007. "Welfare State, Market Imperfections, and International Trade," Open Economies Review, Springer, vol. 18(1), pages 95-118, February.
    • Handle: RePEc:kap:openec:v:18:y:2007:i:1:p:95-118
    DOI: 10.1007/s11079-007-9003-2
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11079-007-9003-2
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11079-007-9003-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Frederick Van der Ploeg, 2003. "Do Social Policies Harm Employment and Growth?," CESifo Working Paper Series 886, CESifo.
    3. Hassan Molana & Catia Montagna, 2002. "Cumulative Causation, Capital Mobility and the Welfare State," Dundee Discussion Papers in Economics 128, Economic Studies, University of Dundee.
    4. Crepaz, Markus M. L., 2002. "Duane Swank, Global Capital, Political Institutions, and Policy Change in Developed Welfare States. Cambridge University Press, Cambridge, 2002," Journal of Public Policy, Cambridge University Press, vol. 22(01), pages 101-106, January.
    5. Alesina, Alberto & Perotti, Roberto, 1997. "The Welfare State and Competitiveness," American Economic Review, American Economic Association, vol. 87(5), pages 921-939, December.
    6. Dani Rodrik, 1998. "Has Globalization Gone Too Far?," Challenge, Taylor & Francis Journals, vol. 41(2), pages 81-94, March.
    7. Swank,Duane, 2002. "Global Capital, Political Institutions, and Policy Change in Developed Welfare States," Cambridge Books, Cambridge University Press, number 9780521806688.
    8. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
    9. Acemoglu, Daron & Shimer, Robert, 2000. "Productivity gains from unemployment insurance," European Economic Review, Elsevier, vol. 44(7), pages 1195-1224, June.
    10. Young, Allyn A., 1928. "Increasing Returns and Economic Progress," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 38, pages 527-542.
    11. Swank,Duane, 2002. "Global Capital, Political Institutions, and Policy Change in Developed Welfare States," Cambridge Books, Cambridge University Press, number 9780521001441.
    12. Bartelsman, Eric J & Caballero, Ricardo J & Lyons, Richard K, 1994. "Customer- and Supplier-Driven Externalities," American Economic Review, American Economic Association, vol. 84(4), pages 1075-1084, September.
    13. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Federica Calidoni, 2004. "Aggregate and Disaggregate Analysis of the Effects of Government Expenditure on Growth," Dundee Discussion Papers in Economics 160, Economic Studies, University of Dundee.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. 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.
    3. Brady, David & Beckfield, Jason & Seeleib-Kaiser, Martin, 2004. "Economic Globalization and the Welfare State in Affluent Democracies, 1975-1998," Working papers of the ZeS 12/2004, University of Bremen, Centre for Social Policy Research (ZeS).
    4. Thibault Darcillon, 2013. "What Causes Labor-Market Volatility? The Role of Finance and Welfare State Institutions," Post-Print halshs-00881198, HAL.
    5. Xiao Tan, 2017. "Explaining provincial government health expenditures in China: evidence from panel data 2007–2013," China Finance and Economic Review, Springer, vol. 5(1), pages 1-21, December.
    6. Chen, Yu-Fu & Görg, Holger & Görlich, Dennis & Molana, Hassan & Montagna, Catia & Temouri, Yama, 2014. "Globalisation and the Future of the Welfare State," IZA Policy Papers 81, Institute of Labor Economics (IZA).
    7. Vikas Dixit, 2014. "Relation between Trade Openness, Capital Openness and Government Size in India," Foreign Trade Review, , vol. 49(1), pages 1-29, February.
    8. Antonio Sciala' & Paolo Liberati, 2008. "The impact of economic openness on the vertical structure of the public sector," "Marco Fanno" Working Papers 0085, Dipartimento di Scienze Economiche "Marco Fanno".
    9. Yong Soo Park, 2005. "The Decline of the Welfare State?," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 8(2), pages 107-134, June.
    10. Kosack, Stephen & Tobin, Jennifer L., 2015. "Which Countries’ Citizens Are Better Off With Trade?," World Development, Elsevier, vol. 76(C), pages 95-113.
    11. Hassan Molana & Catia Montagna, 2002. "Cumulative Causation, Capital Mobility and the Welfare State," Dundee Discussion Papers in Economics 128, Economic Studies, University of Dundee.
    12. Stephanie J. Rickard, 2006. "The Costs of Risk: Examining the Missing Link between Globalization and Social Spending," The Institute for International Integration Studies Discussion Paper Series iiisdp185, IIIS.
    13. Schulze-Cleven, Tobias, 2006. "The Politics of an Experimental Society: Creating Labor Market Flexibility in Europe," Institute for Research on Labor and Employment, Working Paper Series qt92x040tt, Institute of Industrial Relations, UC Berkeley.
    14. Pasquale Tridico & Walter Paternesi Meloni, 2018. "Economic growth, welfare models and inequality in the context of globalisation," The Economic and Labour Relations Review, , vol. 29(1), pages 118-139, March.
    15. Ehrlich Sean D, 2010. "Who Supports Compensation? Individual Preferences for Trade-Related Unemployment Insurance," Business and Politics, De Gruyter, vol. 12(1), pages 1-24, April.
    16. Paolo Liberati & Antonio Sciala, 2011. "How economic integration affects the vertical structure of the public sector," Economics of Governance, Springer, vol. 12(4), pages 385-402, December.
    17. Francesca Gastaldi & Paolo Liberati, 2011. "Economic integration and government size: a review of the empirical literature," Financial Theory and Practice, Institute of Public Finance, vol. 35(3), pages 327-384.
    18. Gaston, Noel & Rajaguru, Gulasekaran, 2013. "International migration and the welfare state revisited," European Journal of Political Economy, Elsevier, vol. 29(C), pages 90-101.
    19. Duane Swank, 2015. "The Political Foundations of Redistribution in Post-industrial Democracies," LIS Working papers 653, LIS Cross-National Data Center in Luxembourg.
    20. Özlem Onaran & Valerie Boesch, 2014. "The Effect of Globalization on the Distribution of Taxes and Social Expenditures in Europe: Do Welfare State Regimes Matter?," Environment and Planning A, , vol. 46(2), pages 373-397, February.

    More about this item

    Keywords

    Welfare state; Circular causation; International trade; E6; F1; F4; H3; J5;
    All these keywords.

    JEL classification:

    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:openec:v:18:y:2007:i:1:p:95-118. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.