International Integration and the Welfare State

U of Aarhus, Economics Working Paper No. 2002-2

40 Pages Posted: 28 Jan 2002

See all articles by Torben M. Andersen

Torben M. Andersen

University of Aarhus - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Date Written: January 2002

Abstract

This paper discusses how international integration affects the need and scope for welfare state activities. The first part reviews the main mechanisms, which have been considered in the literature, namely, tax base mobility, risk and race to the bottom effects in welfare policies. The second part considers in more detail the implications that arise via labor market effects, and it is argued that the latter are crucial since product market integration affects the mobility of jobs, even though labor mobility across nations remains small. This may in turn have important consequences for the financing of welfare state activities through taxes levied on labor, but also the need for welfare state activities. The paper ends by discussing some policy options.

Keywords: Risk, welfare policies, taxation, globalization

JEL Classification: E30, F10, H11

Suggested Citation

Andersen, Torben M., International Integration and the Welfare State (January 2002). U of Aarhus, Economics Working Paper No. 2002-2, Available at SSRN: https://ssrn.com/abstract=298646 or http://dx.doi.org/10.2139/ssrn.298646

Torben M. Andersen (Contact Author)

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