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Explaining Welfare State Survival: The Role of Economic Freedom and Globalization

Using the economic freedom index and the newly developed KOF-index of globalization, it is shown that the Scandinavian welfare states have experienced faster, bigger and more consistent increases in these areas, compared to the smaller European and the so called liberal welfare states. The market economy and globalization hence do not pose threats to these welfare states, but are instead neglected factors in explaining their survival and good economic performance. Big government decreases the economic freedom index by definition, but the welfare states compensate in other areas, such as legal structure and secure property rights.

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Paper provided by The Ratio Institute in its series Ratio Working Papers with number 101.

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Length: 23 pages
Date of creation: 02 Jun 2006
Date of revision:
Handle: RePEc:hhs:ratioi:0101
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  1. Andreas Bergh, 2004. "The Universal Welfare State: Theory and the Case of Sweden," Political Studies, Political Studies Association, vol. 52, pages 745-766, December.
  2. Mendoza, Enrique G. & Tesar, Linda L., 2005. "Why hasn't tax competition triggered a race to the bottom? Some quantitative lessons from the EU," Journal of Monetary Economics, Elsevier, vol. 52(1), pages 163-204, January.
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  4. Doucouliagos, Chris & Ulubasoglu, Mehmet Ali, 2006. "Economic freedom and economic growth: Does specification make a difference?," European Journal of Political Economy, Elsevier, vol. 22(1), pages 60-81, March.
  5. Niclas Berggren & Henrik Jordahl, 2005. "Does free trade really reduce growth? Further testing using the economic freedom index," Public Choice, Springer, vol. 122(1), pages 99-114, January.
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  7. Agell, J & Englund, P & Sodersten, J, 1996. "Tax reform of the Century - the Swedish Experiment," Papers 1996-13, Uppsala - Working Paper Series.
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  12. Ohlsson, H. & Agell, J. & Lindh, T., 1995. "Growth and the Public Sector: A Critical Review Essay," Papers 1995-09, Uppsala - Working Paper Series.
  13. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  14. Lindbeck, Assar, 1994. "The Welfare State and the Employment Problem," American Economic Review, American Economic Association, vol. 84(2), pages 71-75, May.
  15. Peltzman, Sam, 1980. "The Growth of Government," Journal of Law and Economics, University of Chicago Press, vol. 23(2), pages 209-87, October.
  16. Alesina, Alberto & Glaeser, Edward, 2005. "Fighting Poverty in the US and Europe: A World of Difference," OUP Catalogue, Oxford University Press, number 9780199286102, March.
  17. Karl Ove Aarbu & Thor Olav Thoresen, 1997. "The Norwegian Tax Reform; Distributional Effects and the High-income Response," Discussion Papers 207, Research Department of Statistics Norway.
  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.
  19. Axel Dreher, 2002. "Does Globalization Affect Growth?," Development and Comp Systems 0210004, EconWPA, revised 04 Feb 2003.
  20. Snower, Dennis J, 1993. "The Future of the Welfare State," Economic Journal, Royal Economic Society, vol. 103(418), pages 700-717, May.
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