Globalisation and Social Spending

Paul De Grauwe and Magdalena Polan (magdalena.polan@econ.kuleuven.ac.be)
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Magdalena Polan: K.U.Leuven, C.E.S., International Economics

International Economics Working Papers Series from Katholieke Universiteit Leuven, Centrum voor Economische Studiën, International Economics

Abstract: We provide evidence indicating that countries with well-developed social security systems do not necessarily face a trade-off between social spending and competitiveness. On average, countries that spend a lot on social needs score well in the competitiveness league. We investigate the importance of a reverse causality from competitiveness to social spending, and find that this is weak. We also present some possible explanations for our empirical finding. Finally, we interpret our findings in the framework of a theoretical model in which risk affects the size of the social sector and in which social spending affects the production function of the private sector.

Keywords: economic integration; globalisation; terms-of-trade variability; international trade (search for similar items in EconPapers)
JEL-codes: F02 F10 F15 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2003-02
New Economics Papers: this item is included in nep-cwa
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Citations: View citations in EconPapers (8)

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