The Welfare State and the Forces of Globalization
The emergence of the Asian tiger countries and the participation of the ex-communist countries in world trade has reduced the equilibrium price of labor in western Europe and elsewhere. However, the actual price of labor hardly reacts, because the welfare state's minimum replacement incomes are fixed. The rigidity of wages causes pathological overreactions of the European economy in terms of excessive capital exports, excessive immigration and excessive structural change towards the capital intensive export sectors. The overreactions cause unemployment, sluggish growth, a current account surplus and a high export volume, but may prevent gains from trade. Moving from a system of wage replacement incomes to one that pays wage subsidies would enable a more efficient economic reaction that would not jeopardize social goals but bring about more employment, growth and gains from trade.
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- Hans-Werner Sinn, 2005. "Basar-Ökonomie Deutschland - Exportweltmeister oder Schusslicht?," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 58(06), pages 03-42, 03.
- 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 for Economic Research at the University of Munich, vol. 55(09), pages 03-52, 05.
- Sinn, Hans-Werner, 2005.
"Migration and Social Replacement Incomes: How to Protect Low-IncomeWorkers in the Industrialized Countries against the Forces of Globalizationand Market Integration,"
Munich Reprints in Economics
937, University of Munich, Department of Economics.
- Hans-Werner Sinn, 2005. "Migration and Social Replacement Incomes: How to Protect Low-Income Workers in the Industrialized Countries Against the Forces of Globalization and Market Integration," International Tax and Public Finance, Springer, vol. 12(4), pages 375-393, August.
- Hans-Werner Sinn, 2004. "Migration and Social Replacement Incomes: How to Protect Low-Income Workers in the Industrialized Countries Against the Forces of Globalization and Market Integration," CESifo Working Paper Series 1265, CESifo Group Munich.
- Phelps, Edmund S, 1994. "Low-Wage Employment Subsidies versus the Welfare State," American Economic Review, American Economic Association, vol. 84(2), pages 54-58, May.
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