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GLOBALIZATION AND SOCIAL SPENDING
Author(s) -
De Grauwe Paul,
Polan Magdalena
Publication year - 2005
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/j.1468-0106.2005.00263.x
Subject(s) - economics , globalization , causality (physics) , social security , league , empirical evidence , face (sociological concept) , public economics , macroeconomics , market economy , social science , philosophy , physics , epistemology , quantum mechanics , astronomy , sociology
. 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.