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The Effect of Globalization on the Distribution of Taxes and Social Expenditures in Europe: Do Welfare State Regimes Matter?

Author

Listed:
  • Özlem Onaran

    (University of Greenwich Business School, Park Row, Greenwich, London, SE 10 9LS, England)

  • Valerie Boesch

    (Ministry of Social Affairs and Labor, Department of International Labor Market Policy, A-1010 Vienna, Austria)

Abstract
This paper estimates the effect of globalization on the implicit tax rates (ITRs) on capital income, labor income, and consumption, and the share of social protection expenditures in total public expenditures in Western and Eastern Europe. It tests the coexistence of efficiency and compensation effects of globalization on the expenditure and the revenue sides of government budgets. In Western Europe, globalization leads to an increase in social expenditures; however, these expenditures are to an increasing extent financed by taxes on labor. There are important differences between the welfare states. In the conservative regimes, both social expenditures and taxes on labor increase due to globalization. In the social-democratic regimes social expenditures are not affected by globalization, but the ITR on labor increases, whereas ITRs on capital and consumption decrease as a result of globalization. In the liberal regimes, the ITR on labor is rising, while social expenditures are declining. In the southern welfare regime globalization does not have any significant effects on the distribution of taxes or social spending. In Eastern Europe, in the Baltic states globalization leads to a decrease in social spending, whereas in the other Central and Eastern European New Member States (postcommunist European regimes) there is an upward convergence in social spending due to globalization. The ITRs on consumption decrease due to globalization in the postcommunist European regimes, whereas in the Baltic states there is no robust significant effect of globalization on taxes.

Suggested Citation

  • Özlem Onaran & Valerie Boesch, 2014. "The Effect of Globalization on the Distribution of Taxes and Social Expenditures in Europe: Do Welfare State Regimes Matter?," Environment and Planning A, , vol. 46(2), pages 373-397, February.
    • Handle: RePEc:sae:envira:v:46:y:2014:i:2:p:373-397
    DOI: 10.1068/a45370
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    Cited by:

    1. Dani Rodrik, 2018. "Populism and the economics of globalization," Journal of International Business Policy, Palgrave Macmillan, vol. 1(1), pages 12-33, June.
    2. Niklas Potrafke, 2019. "The globalisation–welfare state nexus: Evidence from Asia," The World Economy, Wiley Blackwell, vol. 42(3), pages 959-974, March.
    3. Curt Pankratz, 2017. "A Multitypological Approach to the Relationship Between Welfare States and Globalization," SAGE Open, , vol. 7(1), pages 21582440176, February.
    4. Marcelo Santos & Marta Simões, 2021. "Globalisation, Welfare Models and Social Expenditure in OECD Countries," Open Economies Review, Springer, vol. 32(5), pages 1063-1088, November.
    5. Florian Haelg & Niklas Potrafke & Jan-Egbert Sturm, 2022. "The determinants of social expenditures in OECD countries," Public Choice, Springer, vol. 193(3), pages 233-261, December.
    6. Alexander Guschanski & Özlem Onaran, 2016. "The political economy of income distribution: industry level evidence from Austria," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 156, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    7. Priyaranjan Jha & Rahul Mukherjee, 2023. "Global Taxation and National Welfare States," CESifo Working Paper Series 10522, CESifo.
    8. Iftikhar Lodhi, 2021. "Globalisation and public policy: bridging the disciplinary and epistemological boundaries [Which synthesis? Strategies of theoretical integration and the neorealist-neoliberal debate]," Policy and Society, Darryl S. Jarvis and M. Ramesh, vol. 40(4), pages 522-544.
    9. Özlem Onaran, 2016. "Secular stagnation and progressive economic policy alternatives," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 13(2), pages 229-240, September.
    10. Özlem Onaran, 2016. "Wage- versus profit-led growth in the context of international interactions and public spending: The political aspects of wage-led recovery," Working Papers PKWP1603, Post Keynesian Economics Society (PKES).
    11. Alexander Guschanski & Özlem Onaran, 2018. "Determinants of the Wage Share: A Cross-country Comparison Using Sectoral Data," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 19(02), pages 44-54, July.
    12. Jha, Priyaranjan & Gozgor, Giray, 2019. "Globalization and taxation: Theory and evidence," European Journal of Political Economy, Elsevier, vol. 59(C), pages 296-315.
    13. Pedro Antonio Martín Cervantes & Nuria Rueda López & Salvador Cruz Rambaud, 2020. "The Effect of Globalization on Economic Development Indicators: An Inter-Regional Approach," Sustainability, MDPI, vol. 12(5), pages 1-18, March.
    14. Pedro Antonio Martín Cervantes & Nuria Rueda López & Salvador Cruz Rambaud, 2020. "The Relative Importance of Globalization and Public Expenditure on Life Expectancy in Europe: An Approach Based on MARS Methodology," IJERPH, MDPI, vol. 17(22), pages 1-20, November.
    15. Orsetta Causa & Anna Vindics & Oguzhan Akgun, 2018. "An empirical investigation on the drivers of income redistribution across OECD countries," OECD Economics Department Working Papers 1488, OECD Publishing.
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