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The Dilemma of Globalisation

Author

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  • Sinn, Hans-Werner

Abstract

Globalisation means gains from trade, but not for everyone. As gains from trade come along with factor price convergence, substantial fractions of the working classes in the high-wage countries of the West are likely to belong to the group of losers. In this situation it is tempting for the welfare state to help out, but the difficulties are enormous. On the one hand, the payment of social replacement incomes makes wages stick, preventing the gains from trade, causing mass unemployment and turning the economies of the West into bazaars with excessive outsourcing and offshoring activities. On teh other, taxes needed for compensation payments to the working classes can hardly be levied from the mobile factors of production, given that globalisation has increased their mobility. This is a double dilemma for the welfare state. The paper discusses the possibilites of mitigating the dilemmas by paying wage subsidies for domestic residents and encouraging private savings so as to give workers a capital income in the future.

Suggested Citation

  • Sinn, Hans-Werner, 2004. "The Dilemma of Globalisation," Munich Reprints in Economics 949, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenar:949
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    File URL: https://epub.ub.uni-muenchen.de/949/1/Sinn-Dilemma-of-Globalisation.pdf
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    References listed on IDEAS

    as
    1. Sinn, Hans-Werner, 2002. "EU Enlargement and the Future of the Welfare State," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(1), pages 104-115, February.
    2. Scharpf, Fritz W., 2002. "The European Social Model: Coping with the challenges of diversity," MPIfG Working Paper 02/8, Max Planck Institute for the Study of Societies.
    3. Hans-Werner Sinn, 2001. "Social Dumping in the Transformation Process?," NBER Working Papers 8364, National Bureau of Economic Research, Inc.
    4. Hans-Werner Sinn & Frank Westermann, 2000. "Two Mezzogiornos," CESifo Working Paper Series 378, CESifo Group Munich.
    5. Giuseppe Bertola & Pietro Garibaldi, 2003. "The Structure and History of Italian Unemployment," CESifo Working Paper Series 907, CESifo Group Munich.
    6. Hans-Werner Sinn, 2004. "The New Systems Competition," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 5(1), pages 23-38, February.
    7. Wolfgang Nierhaus, 1999. "Höhere Rentenanpassung in Ostdeutschland erforderlich?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 52(19), pages 20-24, October.
    8. Ansgar Belke & Martin Hebler, 2001. "Towards a European Social Union: Impacts on Labor Markets in the Acceding CEECs," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 198/2001, Department of Economics, University of Hohenheim, Germany.
    9. Hans-Werner Sinn & Gebhard Flaig & Martin Werding & Sonja Munz & Nicola Düll & Herbert Hofmann, 2001. "EU-Erweiterung und Arbeitskräftemigration : Wege zu einer schrittweisen Annäherung der Arbeitsmärkte," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 2.
    10. Francisco Rodriguez & Dani Rodrik, 2001. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence," NBER Chapters,in: NBER Macroeconomics Annual 2000, Volume 15, pages 261-338 National Bureau of Economic Research, Inc.
    11. Hans-Werner Sinn, 1991. "Macroeconomic Aspects of German Unification," NBER Working Papers 3596, National Bureau of Economic Research, Inc.
    12. Schröder, Christoph, 2000. "Industrielle Arbeitskosten im internationalen Vergleich," IW-Trends – Vierteljahresschrift zur empirischen Wirtschaftsforschung, Institut der deutschen Wirtschaft Köln (IW) / Cologne Institute for Economic Research, vol. 27(3), pages 77-91.
    13. Ansgar Belke & Martin Hebler, 2002. "Towards a European Social Union: Impacts on Labor Markets in the Acceding Countries," Constitutional Political Economy, Springer, vol. 13(4), pages 313-335, December.
    14. Richter, Wolfram F., 2002. "Social Security and Taxation of Labour Subject to Subsidiarity and Freedom of Movement," IZA Discussion Papers 490, Institute for the Study of Labor (IZA).
    15. Feldmann, Horst, 1999. "Zehn Jahre EU-Sozialcharta," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1949 - 2007), ZBW – German National Library of Economics / Leibniz Information Centre for Economics, vol. 79(11), pages 670-676.
    16. Hans-Werner Sinn & Christian Holzner & Wolfgang Meister & Wolfgang Ochel & Martin Werding, 2002. "Aktivierende Sozialhilfe - Ein Weg zu mehr Beschäftigung und Wachstum," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 55(09), pages 03-52, May.
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    More about this item

    Keywords

    Globalisation; Welfare State; Wages;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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