IDEAS home Printed from https://ideas.repec.org/p/zbw/mpifgw/p0004.html
   My bibliography  Save this paper

Globalization, tax competition, and the fiscal viability of the welfare state

Author

Listed:
  • Genschel, Philipp

Abstract

Does globalization undermine the fiscal basis of the welfare state? The conventional wisdom believes so: open borders cause tax competition, which in turn leads to a race to the bottom in capital taxation. However, the data show that revenues from capital taxation are fairly stable in OECD countries. Some observers conclude from this that globalization does not pose much of a challenge to the welfare state. This conclusion is unwarranted because it overlooks that tax competition was not the only challenge facing welfare states during the 1980s and 1990s. There was also slow growth, rampant unemployment, and high levels of precommitted spending. These problems exerted countervailing pressures that prevented a race to the bottom in taxation. Yet, this does not mean that national autonomy has not been diminished. The welfare state is trapped in between external pressures to reduce the tax burden on capital and internal pressures to maintain revenue levels and relieve the tax burden on labor.

Suggested Citation

  • Genschel, Philipp, 2001. "Globalization, tax competition, and the fiscal viability of the welfare state," MPIfG Working Paper 01/1, Max Planck Institute for the Study of Societies.
  • Handle: RePEc:zbw:mpifgw:p0004
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/41660/1/639582605.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Sinn, Hans-Werner, 1990. "Tax harmonization and tax competition in Europe," European Economic Review, Elsevier, vol. 34(2-3), pages 489-504, May.
    2. Erik Norrman & Charles E. McLure Jr., 1997. "Tax Policy in Sweden," NBER Chapters,in: The Welfare State in Transition: Reforming the Swedish Model, pages 109-154 National Bureau of Economic Research, Inc.
    3. Hines, James R. Jr., 1999. "Lessons From Behavioral Responses to International Taxation," National Tax Journal, National Tax Association, vol. 52(2), pages 305-322, June.
    4. Sinn, Hans-Werner, 1997. "The selection principle and market failure in systems competition," Journal of Public Economics, Elsevier, vol. 66(2), pages 247-274, November.
    5. Alfons Weichenrieder, 1996. "Fighting international tax avoidance," Fiscal Studies, Institute for Fiscal Studies, vol. 17(1), pages 37-58, February.
    6. Claudio M. Radaelli, 1998. "Policy Narratives in the European union: The Case of Harmful Tax Competition," EUI-RSCAS Working Papers 34, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    7. Tanzi,Vito & Schuknecht,Ludger, 2000. "Public Spending in the 20th Century," Cambridge Books, Cambridge University Press, number 9780521662918, May.
    8. Jeffrey Owens, 1993. "Globalisation: the implications for tax policies," Fiscal Studies, Institute for Fiscal Studies, vol. 14(3), pages 21-44, August.
    9. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 47-104, April.
    10. G√ľnther G. Schulze & Heinrich W. Ursprung, 1999. "Globalisation of the Economy and the Nation State," The World Economy, Wiley Blackwell, vol. 22(3), pages 295-352, May.
    11. Mendoza, Enrique G. & Milesi-Ferretti, Gian Maria & Asea, Patrick, 1997. "On the ineffectiveness of tax policy in altering long-run growth: Harberger's superneutrality conjecture," Journal of Public Economics, Elsevier, vol. 66(1), pages 99-126, October.
    12. Harry Grubert & Timothy Goodspeed & Deborah L. Swenson, 1993. "Explaining the Low Taxable Income of Foreign-Controlled Companies in the United States," NBER Chapters,in: Studies in International Taxation, pages 237-276 National Bureau of Economic Research, Inc.
    13. Sherwin Rosen, 1996. "Public Employment and the Welfare State in Sweden," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 729-740, June.
    14. Duane Swank, 1998. "Funding the Welfare State: Globalization and the Taxation of Business in Advanced Market Economies," Political Studies, Political Studies Association, vol. 46(4), pages 671-692, September.
    15. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
    16. Willi Leibfritz & John Thornton & Alexandra Bibbee, 1997. "Taxation and Economic Performance," OECD Economics Department Working Papers 176, OECD Publishing.
    17. James R. Hines & Eric M. Rice, 1994. "Fiscal Paradise: Foreign Tax Havens and American Business," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 149-182.
    18. Vito Tanzi & Parthasarathi Shome, 1993. "A Primer on Tax Evasion," IMF Staff Papers, Palgrave Macmillan, vol. 40(4), pages 807-828, December.
    19. Garrett, Geoffrey, 1998. "Global Markets and National Politics: Collision Course or Virtuous Circle?," International Organization, Cambridge University Press, vol. 52(04), pages 787-824, September.
    20. Scharpf, Fritz W., 2000. "The viability of advanced welfare states in the international economy. Vulnerabilities and options," European Review, Cambridge University Press, vol. 8(03), pages 399-425, July.
    21. Dehejia, Vivek H. & Genschel, Philipp, 1998. "Tax competition in the European Union," MPIfG Discussion Paper 98/3, Max Planck Institute for the Study of Societies.
    22. repec:cup:apsrev:v:91:y:1997:i:03:p:531-551_21 is not listed on IDEAS
    23. Hines, James R. Jr., 1999. "Lessons from Behavioral Responses to International Taxation," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 305-22, June.
    24. Vito Tanzi & Parthasarathi Shome, 1993. "A Primeron Tax Evasion," IMF Working Papers 93/21, International Monetary Fund.
    25. Kirchgassner, Gebhard & Pommerehne, Werner W., 1996. "Tax harmonization and tax competition in the European Union: Lessons from Switzerland," Journal of Public Economics, Elsevier, vol. 60(3), pages 351-371, June.
    26. Ganghof, Steffen, 1999. "Adjusting national tax policy to economic internationalization: Strategies and outcomes," MPIfG Discussion Paper 99/6, Max Planck Institute for the Study of Societies.
    27. Tullio, Giuseppe, 1987. "Long run implications of the increase in taxation and public debt for employment and economic growth in Europe," European Economic Review, Elsevier, vol. 31(3), pages 741-774, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Melisa Chanegriha & Chris Stewart & Christopher Tsoukis, 2017. "Identifying the robust economic, geographical and political determinants of FDI: an Extreme Bounds Analysis," Empirical Economics, Springer, vol. 52(2), pages 759-776, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:mpifgw:p0004. 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: (ZBW - German National Library of Economics). General contact details of provider: http://edirc.repec.org/data/mpigfde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.