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Globalisation and the future of the welfare state

  • Yu-Fu Chen
  • Holger Görg
  • Dennis Görlich
  • Hassan Molana
  • Catia Montagna
  • Yama Temouri

The conventional wisdom is that increasing globalisation requires a reduction in the provision of the welfare state among industrialised countries as the distortions resulting from this type of expenditure undermine international competitiveness and the ability of countries to attract and/or retain industries. However, there are empirical observations and theoretical models that are not in line with this conventional wisdom -- see for instance Molana and Montagna (2006) and Goerg, Molana and Montagna (2009). We will carry out an empirical study using multi-country data for selected OECD countries to investigate the link between two aspects of globalisation, namely international competitiveness and foreign direct investment, and the size of government expenditure on social policies. The paper will also take into account theoretical arguments and empirical evidence from related studies.

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Paper provided by WWWforEurope in its series WWWforEurope Working Papers series with number 54.

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Length: 26
Date of creation: Feb 2014
Date of revision:
Publication status: published
Handle: RePEc:feu:wfewop:y:2014:m:2:d:0:i:54
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Order Information: Postal: WWWforEurope Project Office Austrian Institute of Economic Research Arsenal Objekt 20 A-1030 Vienna

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  1. Andersen, Torben M., 2002. "International Integration, Risk and the Welfare State," IZA Discussion Papers 456, Institute for the Study of Labor (IZA).
  2. Ingo Geishecker & Ingo Geishecker & Jakob Roland Munch, 2007. "Do Labour Market Institutions Matter? Micro-level Wage Effects of International Outsourcing in Three European Countries," EPRU Working Paper Series 07-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
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  4. Alesina, Alberto & Perotti, Roberto, 1997. "The Welfare State and Competitiveness," American Economic Review, American Economic Association, vol. 87(5), pages 921-39, December.
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  8. Holger Görg, & Hassan Molana, & Catia Montagna, . "Foreign Direct Investment, Tax Competition and Social Expenditure," Discussion Papers 07/03, University of Nottingham, GEP.
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  14. Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc.
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  17. Torben Andersen & Allan Sørensen, 2011. "Globalisation squeezes the public sector—is it so obvious?," International Tax and Public Finance, Springer, vol. 18(4), pages 369-382, August.
  18. Sinn, Hans-Werner, 1997. "The selection principle and market failure in systems competition," Munich Reprints in Economics 19854, University of Munich, Department of Economics.
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