Abstract
Two hypotheses relate to the globalization-welfare state nexus: the efficiency hypothesis predicts that globalization reduces government sector size and governments’ capacity to finance the welfare state. The compensation hypothesis, in contrast, predicts that globalization induces a higher demand for social insurance which results in an extended welfare state. Empirical evidence on the globalization-welfare state nexus is mixed. The evidence is re-examined by investigating a yearly panel dataset of 186 countries for the 1970-2004 period. This paper uses data compiled by the Penn World Tables on government sector size and employs the Konjunkturforschungsstelle (KOF-Swiss Economic Institute) index of globalization. The results show that globalization increased government sectors around the world. Social globalization especially had a positive influence. Globalization-induced effects were stronger in Organisation for Economic Co-operation and Development (OECD) countries. Overall globalization and economic globalization reduced the relative price of government expenditures. These findings suggest that globalization does not jeopardize the welfare state at all.
| Item Type: | Journal article |
|---|---|
| Faculties: | Economics Economics > Chairs > CESifo-Professorship for Public Finance |
| Subjects: | 300 Social sciences > 330 Economics |
| Language: | English |
| Item ID: | 19212 |
| Date Deposited: | 15. Apr 2014 08:49 |
| Last Modified: | 04. Nov 2020 13:00 |
Actions (login required)
- View Item
