The Welfare State Besides Globalization Forces

47 Pages Posted: 22 Aug 2018

See all articles by Assaf Razin

Assaf Razin

Tel Aviv University

Efraim Sadka

Tel Aviv University - Eitan Berglas School of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Date Written: August 2018

Abstract

In this paper we review of literature and offer historical, empirical and analytical explanation for the interactions between the welfare state and globalization driving forces. Globalization – a widespread contemporaneous phenomenon – generates international tax competition. The consequent erosion in the tax base, especially on capital, is another blow to the finances of the welfare state. Financial globalization facilitates reallocation of capital across borders. The increased mobility of capital may likely to trigger a race-to-the-bottom tax competition. The consequent erosion in the tax base, especially on capital, is potentially a blow to the fiscal finance backing up the far-reaching redistribution of income by the typical welfare state. Another major aspect of globalization, low skill migration, attracted to the welfare state may put additional strain on it. An aging welfare-state – a common contemporary phenomenon in many industrial countries calls for young and high skill immigrants for its survival.

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Suggested Citation

Razin, Assaf and Sadka, Efraim, The Welfare State Besides Globalization Forces (August 2018). NBER Working Paper No. w24919. Available at SSRN: https://ssrn.com/abstract=3236724

Assaf Razin (Contact Author)

Tel Aviv University ( email )

Efraim Sadka

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
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+972 3 642 8074 (Fax)

National Bureau of Economic Research (NBER)

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CESifo (Center for Economic Studies and Ifo Institute)

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IZA Institute of Labor Economics

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