Financial Globalization and the Welfare State

Delivering sustainable economic growth
Posted Jul 02, 2018 | National Bureau of Economic Research, Assaf Razin, Efraim Sadka

The economic link between globalization and income distribution has been widely studied through the lens of the international-trade paradigm. However, this viewpoint does not address the impact of globalization on redistribution policies aiming to reduce inequality. To address the links between financial globalization and redistribution policy, this paper develops a model, where easing country access to the world capital markets induces political-economy-based policy changes that impact income inequality. In this National Bureau of Economic Research article Assaf Razin and Efraim Sadka discuss the model's assumptions and predictions with evidence on financial globalization, international tax competition, and changes in the generosity of the welfare state.


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