Skip to main content
SpringerLink
Log in

Welfare Policies, Labour Taxation and International Integration

  • Published:
International Tax and Public Finance Aims and scope Submit manuscript

Abstract

How will international integration affect welfare policies? This paper considers the possibilities of financing public sector activities (public consumption and social security expenses) by general (wage) taxation in an economy which becomes more integrated in international product markets. Even if labour is internationally immobile, the increased mobility of products and hence jobs implies a change in the distortions arising from taxes and social security contributions levied on labour income. Since financing of social security via general taxation involves a common resource problem the effects of international integration depend critically on the institutional structure of the labour market. This paper shows that increased international integration inducing more product market competition implies that it becomes more costly to maintain welfare systems financed by general taxation.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Alesina, A. and P. Perotti. (1997). “The Welfare State and Competitiveness.” American Economic Review 87, 921–939.

    Google Scholar 

  • Andersen, T. M. (2000a). “International Integration, Risk and the Welfare State.” Scandinavian Journal of Economics (to appear).

  • Andersen, T. M. (2000b). “Product Market Integration, Wage Dispersion and Unemployment.” Working Paper.

  • Andersen, T. M., N. Haldrup and J. R. Sørensen. (2000). “Labour Market Implications of EU Product Market Integration.” Economic Policy 30.

  • Atkinson, A. B. (1999). “The Economic Consequences of Roling back the Welfare State.” Munich Lectures in Economics. The MIT Press.

  • Blanchard, O. and S. Fischer. (1989). Lectures on Macroeconomics. Cambridge: MIT Press.

    Google Scholar 

  • Booth, A., M. Burda, L. Calmfors, D. Checchi, R. Naylor and J.Visser. (2001). “The Future of Collective Bargaining in Europe.” In T. Boeri, A. Brugiavini, and L. Calmfors (eds.), The Role of Unions in the Twenty-First Century. Oxford University Press.

  • Calmfors, L. (1993). “Centralisation of Wage Bargaining and Macroeconomic Performance-A Survey.” OECD Economic Studies 21, 161–191.

    Google Scholar 

  • Calmfors, L. and J. Driffill. (1988). “Bargaining Structure, Corporatism and Macroeconomic Performance.” Economic Policy.

  • Danthine, J.-P. and J. Hunt. (1994). “Wage Bargaining Structure, Employment and Economic Integration.” Economic Journal 104, 528–541.

    Google Scholar 

  • Daveri, F. and G. Tabellini. (2000). “Unemployment, Growth and Taxation in Industrial Countries.” Economic Policy 30.

  • Esping-Andersen, G. (1990). The Three Worlds of Welfare Capitalism. Princeton: Princeton University Press.

    Google Scholar 

  • European Commission. (1999). “The EU Economic Review.” European Economy 69.

  • European Commission. (2000). “Structures of the Taxation Systems in the European Union: 1970–1997.” Eurostat.

  • Flanagan, R. J. (1999). “Macroeconomic Performance and Collective Bargaining: An International Perspective.” Journal of Economic Literature 37, 1150–1175.

    Google Scholar 

  • Hau, H. (1998). “Openness and Real Exchange Volatility: Theory and Evidence.” Mimeo.

  • Holden, S. and O. Raaum. (1991). “Wage Moderation and Union Structure.” Oxford Economic Papers 43, 409–423.

    Google Scholar 

  • Holmlund, B. (1993). “Wage Setting in Private and Public Sectors in a Model with Endogenous Government Behavior.” European Journal of Political Economy 9, 149–162.

    Google Scholar 

  • Holmlund, B. (1998). “Unemployment Insurance in Theory and Practice.” Scandinavian Journal of Economics 100, 113–114.

    Google Scholar 

  • Jackman, R. (1990). “Centralized and Decentralized Pay Determination in Nordic Countries.” In L. Calmfors (ed.), Wage Formation and Macroeconomic Policy in the Nordic Countries. Oxford University Press.

  • Moene, K. O., M. Wallerstein and M. Hoel. (1993). “Bargaining Structure and Economics Performance.” In R.J., Flanagan, et al. (eds.), Trade Union Behaviour, Pay Bargaining and Economic Performance. Clarendon Press Oxford.

    Google Scholar 

  • Moene, K. O and M. Wallerstein. (1995). “How Social Democracy Worked: Labor Market Institutions.” Politics and Society 23, 185–211.

    Google Scholar 

  • OECD. (1999). Policy Briefs-Open Markets Matter: The Benefits of Trade and Investment Liberalization, October, OECD (Paris).

  • Pissarides, C. A. (1998). “The Impact of Employment Tax Cuts on Unemployment and Wages; The Role of Unemloyment Benefits and Tax Structure.” European Economic Review 42, 155–184.

    Google Scholar 

  • Summers, L., J. Gruber and R. Vergara. (1993). “Taxation and the Structure of Labor Markets: The Case of Corporatism.” Quarterly Journal of Economics, 385–411.

  • Tanzi, V. (2000). “Globalization and the Future of Social Protection.” IMF Working Paper WO/00/12.

Download references

Author information

Authors and Affiliations

  1. CEPR, EPRU and IZA, Department of Economics, University of Aarhus, 8000, Aarhus, Denmark

    Torben M. Andersen

Authors
  1. Torben M. Andersen
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Andersen, T.M. Welfare Policies, Labour Taxation and International Integration. International Tax and Public Finance 10, 43–62 (2003). https://doi.org/10.1023/A:1022276913056

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1023/A:1022276913056

Search

Navigation