Globalization and Social Spending

19 Pages Posted: 14 Mar 2005

See all articles by Paul De Grauwe

Paul De Grauwe

London School of Economics & Political Science (LSE); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Centre for Economic Policy Research (CEPR)

Magdalena Polan

KU Leuven - Department of 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 social spending affects the production function of the private sector.

Suggested Citation

De Grauwe, Paul and Polan, Magdalena, Globalization and Social Spending. Pacific Economic Review, Vol. 10, No. 1, pp. 105-123, February 2005. Available at SSRN: https://ssrn.com/abstract=681715

Paul De Grauwe (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Magdalena Polan

KU Leuven - Department of Economics ( email )

Leuven, B-3000
Belgium
+32 16 32 6848 (Phone)
+32 16 32 6796 (Fax)

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