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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. Ruud A. de Mooij & Sjef Ederveen, 2001. "Taxation and Foreign Direct Investment: A Synthesis of Empirical Research," CESifo Working Paper Series 588, CESifo Group Munich.
  2. Ingo Geishecker & Holger Görg & Jakob Roland Munch, . "Do Labour Market Institutions Matter? Micro-level Wage Effects of International Outsourcing in Three European Countries," Discussion Papers 07/42, University of Nottingham, GEP.
  3. Rodrik, Dani, 1996. "Why do More Open Economies Have Bigger Governments?," CEPR Discussion Papers 1388, C.E.P.R. Discussion Papers.
  4. Daniel Kopasker & Holger Görg & Hassan Molana & Catia Montagna, 2013. "Negative Shocks, Job Creation, and Selection," WWWforEurope Working Papers series 11, WWWforEurope.
  5. Baldwin, Richard & Krugman, Paul, 2000. "Agglomeration, Integration and Tax Harmonization," CEPR Discussion Papers 2630, C.E.P.R. Discussion Papers.
  6. Torben M. Andersen & Allan Sørensen, 2008. "Globalisation squeezes the public sector - is it so obvious?," Economics Working Papers 2008-08, School of Economics and Management, University of Aarhus.
  7. Görg, Holger & Molana, Hassan & Montagna, Catia, 2009. "Foreign direct investment, tax competition and social expenditure," International Review of Economics & Finance, Elsevier, vol. 18(1), pages 31-37, January.
  8. Pennings, Enrico & Sleuwaegen, Leo, 2000. "International relocation: firm and industry determinants," Economics Letters, Elsevier, vol. 67(2), pages 179-186, May.
  9. Bruce Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," Atlantic Economic Journal, International Atlantic Economic Society, vol. 33(4), pages 383-403, December.
  10. Pemberton, James, 1999. "Social Security: National Policies with International Implications," Economic Journal, Royal Economic Society, vol. 109(457), pages 492-508, July.
  11. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57, March.
  12. Sinn, Hans-Werner, 1997. "The selection principle and market failure in systems competition," Munich Reprints in Economics 19854, University of Munich, Department of Economics.
  13. Hassan Molana & Catia Montagna, 2005. "Aggregate Scale Economies, Market Integration and Optimal Welfare State Policy," International Trade 0509006, EconWPA.
  14. DEL GATTO, Massimo & MION, Giordano & OTTAVIANO, Gianmarco I.P., 2006. "Trade integration, firm selection and the costs of non-Europe," CORE Discussion Papers 2006061, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  15. Casarico Alessandra, 2001. "Pension systems in integrated capital markets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 1(1), pages 1-19, November.
  16. Alberto Alesina & Roberto Perotti, 1994. "The Welfare State and Competitiveness," NBER Working Papers 4810, National Bureau of Economic Research, Inc.
  17. Perotti, Roberto & Alesina, Alberto, 1997. "The Welfare State and Competitiveness," Scholarly Articles 4553027, Harvard University Department of Economics.
  18. Andersen, Torben M., 2002. "International Integration, Risk and the Welfare State," IZA Discussion Papers 456, Institute for the Study of Labor (IZA).
  19. Amable, Bruno, 2003. "The Diversity of Modern Capitalism," OUP Catalogue, Oxford University Press, number 9780199261147, March.
  20. 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 1075-84, September.
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