The Effect of Globalization on the Distribution of Taxes and Social Expenditures in Europe: Do Welfare State Regimes Matter?

Ozlem Onaran and Valerie Boesch
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Valerie Boesch: Ministry of Social Affairs and Labor, Department of International Labor Market Policy, A-1010 Vienna, Austria

Environment and Planning A, 2014, vol. 46, issue 2, 373-397

Abstract: This paper estimates the effect of globalization on the implicit tax rates (ITRs) on capital income, labor income, and consumption, and the share of social protection expenditures in total public expenditures in Western and Eastern Europe. It tests the coexistence of efficiency and compensation effects of globalization on the expenditure and the revenue sides of government budgets. In Western Europe, globalization leads to an increase in social expenditures; however, these expenditures are to an increasing extent financed by taxes on labor. There are important differences between the welfare states. In the conservative regimes, both social expenditures and taxes on labor increase due to globalization. In the social-democratic regimes social expenditures are not affected by globalization, but the ITR on labor increases, whereas ITRs on capital and consumption decrease as a result of globalization. In the liberal regimes, the ITR on labor is rising, while social expenditures are declining. In the southern welfare regime globalization does not have any significant effects on the distribution of taxes or social spending. In Eastern Europe, in the Baltic states globalization leads to a decrease in social spending, whereas in the other Central and Eastern European New Member States (postcommunist European regimes) there is an upward convergence in social spending due to globalization. The ITRs on consumption decrease due to globalization in the postcommunist European regimes, whereas in the Baltic states there is no robust significant effect of globalization on taxes.

Keywords: globalization; social expenditures; implicit tax rates; welfare regimes (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (18)

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Related works:
Working Paper: The effect of globalization on the distribution of taxes and social expenditures in Europe: do welfare state regimes matter? (2014)
Working Paper: The effect of globalization on the distribution of taxes and social expenditures in Europe: Do welfare state regimes matter? (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:envira:v:46:y:2014:i:2:p:373-397

DOI: 10.1068/a45370

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