The Influence of Globalization on Taxes and Social Policy - an Empirical Analysis for OECD Countries

University of Exeter Economics Discussion Paper

35 Pages Posted: 5 Nov 2003

Date Written: January 2005

Abstract

Using panel regression for the period 1970-2000 the paper analyzes whether globalization has influenced the OECD countries' social and overall spending as well as their tax rates on labor, consumption and capital. Accounting for potential endogeneity of the regressors, the results show that globalization (measured by an index covering 23 variables) did not generally decrease the leeway for independent economic policy. Globalization even increased implicit tax rates on capital (as calculated by Carey and Rabesona 2002) - a result that is mainly driven by economic integration. However, there seems to be competition over tax rates on capital when data based on legislation as suggested by Devereux and Griffith (2003) is employed. Depending on the method of estimation, increasing social integration also influences policies, while political integration does not matter for economic policy in most specifications.

Keywords: Globalization, economic policy, government expenditure, social spending, implicit tax rates, dynamic panel, tax competition

JEL Classification: H7, H87, C23

Suggested Citation

Dreher, Axel, The Influence of Globalization on Taxes and Social Policy - an Empirical Analysis for OECD Countries (January 2005). University of Exeter Economics Discussion Paper. Available at SSRN: https://ssrn.com/abstract=459281 or http://dx.doi.org/10.2139/ssrn.459281

Axel Dreher (Contact Author)

Heidelberg University ( email )

Grabengasse 1
Heidelberg, 69117
Germany

HOME PAGE: http://www.axel-dreher.de

Register to save articles to
your library

Register

Paper statistics

Downloads
288
Abstract Views
3,135
rank
103,960
PlumX Metrics