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Globalisation and Social Spending

  • Paul De Grauwe

    ()

    (K.U.Leuven, C.E.S., International Economics)

  • Magdalena Polan

    ()

    (K.U.Leuven, C.E.S., International Economics)

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    We provide evidence indicating that countries with well-developed social security systems do not necessarily face a trade-off between social spending and competitiveness. On average, countries that spend a lot on social needs score well in the competitiveness league. We investigate the importance of a reverse causality from competitiveness to social spending, and find that this is weak. We also present some possible explanations for our empirical finding. Finally, we interpret our findings in the framework of a theoretical model in which risk affects the size of the social sector and in which social spending affects the production function of the private sector.

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    File URL: http://www.econ.kuleuven.ac.be/ew/academic/intecon/publications/wpie011.pdf
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    Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën, International Economics in its series International Economics Working Papers Series with number wpie011.

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    Length: 27 pages
    Date of creation: Feb 2003
    Date of revision:
    Handle: RePEc:kul:kulwps:wpie011
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    Web page: http://www.econ.kuleuven.ac.be/ew/academic/intecon
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    1. Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc.
    2. Federico Bonaglia & Jorge Braga de Macedo & Maurizio Bussolo, 2001. "How Globalisation Improves Governance," OECD Development Centre Working Papers 181, OECD Publishing.
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