Welfare state, market imperfections and international trade

Hassan Molana, Catia Montagna

    Research output: Working paperDiscussion paper

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    Abstract

    Within a two-sector-two-country model of trade with aggregate scale economies and unionisation, a more generous welfare state in one country increases welfare in that country and can have positive spillover effects on the other. Furthermore, synchronised expansions of social security are more welfare enhancing than unilateral ones. Our results counter the fears that a race to the bottom in social standards may result from the ‘shrinking-tax-base’ entailed by international capital mobility. While affecting trade patterns and income distribution, capital mobility interacts with welfare state policies in increasing welfare, even when capital flows out of the country that initiates the shock.
    Original languageEnglish
    PublisherUniversity of Dundee
    Publication statusPublished - 2003

    Publication series

    NameDundee Discussion Papers in Economics
    PublisherUniversity of Dundee
    No.146
    ISSN (Print)1473-236X

    Keywords

    • Welfare state
    • Circular causation
    • International trade

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  • Research Output

    Welfare state, market imperfections and international trade

    Molana, H. & Montagna, C., 2007, In : Open Economies Review. 18, 1, p. 95 118 p.

    Research output: Contribution to journalArticle

  • Cite this

    Molana, H., & Montagna, C. (2003). Welfare state, market imperfections and international trade. (Dundee Discussion Papers in Economics; No. 146). University of Dundee.