The Costs of Risk: Examining the Missing Link between Globalization and Social Spending
Globalization is often credited with the expansion of the welfare state and increased spending on social insurance programs. However, empirical evidence on the relationship between globalization and social welfare spending is mixed. One possible explanation for these mixed results might be country-specific factors that mediate the effect of globalization on social spending, such as key characteristics of a country's labor market. Countries with fluid, flexible labor markets likely respond to globalization differently than countries with rigid, inflexible markets. At the micro level, workers who find it costly to adjust to market volatility will likely demand compensatory and insurance programs to offset the high costs of adjustment. Given this, the relationship between globalization and social insurance is likely to be more sharply positive among countries with relatively immobile labor. I test this argument using data on social expenditures in both developed and developing countries. The findings indicate that trade exposure increases social spending in countries where workers face high adjustment costs. When workers face low adjustment costs, trade exposure has a strong reductive effect on social spending. This reductive effect declines as adjustment costs increase.
|Date of creation:||16 Nov 2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 00 353 1 896 3888
Fax: 00 353 1 896 3939
Web page: http://www.tcd.ie/iiis/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wood, Adrian & Mayer, Jorg, 2001. "Africa's Export Structure in a Comparative Perspective," Cambridge Journal of Economics, Oxford University Press, vol. 25(3), pages 369-94, May.
- Rodrik, Dani, 1996.
"Why do More Open Economies Have Bigger Governments?,"
CEPR Discussion Papers
1388, C.E.P.R. Discussion Papers.
- 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.
- Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc.
- Wintrobe,Ronald, 1998. "The Political Economy of Dictatorship," Cambridge Books, Cambridge University Press, number 9780521583299.
- Alan B. Krueger & Lawrence H. Summers, 1986. "Reflections on the Inter-Industry Wage Structure," NBER Working Papers 1968, National Bureau of Economic Research, Inc.
- Jeffrey Sachs & Andrew Warner, 1995.
"Economic Reform and the Progress of Global Integration,"
Harvard Institute of Economic Research Working Papers
1733, Harvard - Institute of Economic Research.
- Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
- Wacziarg, Romain & Seddon, Jessica, 2000.
"Trade Liberalization and Intersectoral Labor Movements,"
1652, Stanford University, Graduate School of Business.
- Wacziarg, Romain & Wallack, Jessica Seddon, 2004. "Trade liberalization and intersectoral labor movements," Journal of International Economics, Elsevier, vol. 64(2), pages 411-439, December.
- Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57.
When requesting a correction, please mention this item's handle: RePEc:iis:dispap:iiisdp185. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Colette Keleher)
If references are entirely missing, you can add them using this form.