NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Alexander Horst Schwemmer

Department of Economics
Ludwig-Maximilians-Universität
Geschwister-Scholl-Platz
Munich, 80539
Germany

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org

NBER Working Papers and Publications

August 2019Welfare 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...
 
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