Alexander Horst Schwemmer
Department of Economics
Information about this author at RePEc
NBER Working Papers and Publications
|August 2019||Welfare State vs. Market Forces in a Globalization Era|
with Assaf Razin, Efraim Sadka: w26201
Globalization radically changes income distribution and triggers intense international tax competition. Therefore, globalization entails an extensive restructuring of the welfare state. We analyze a parsimonious model of an open economy, in its trade and finance transactions with the rest of the world, governed by voter-majority-controlled welfare state. We analyze the interactions between taxation, provision of social benefits, and globalization. We demonstrate how these interactions are grounded on trade-related and macro-related fundamentals, familiar from a standard open-economy model:
(i) Degree of trade border frictions, (ii) Degree of international finance frictions, (iii) Relative factor abundance that determines the capital intensity of the country’s exports; and, (iv) Domestic sa...