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The Influence of Globalization on Taxes and Social Policy – an Empirical Analysis for OECD Countries

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  • Axel Dreher

    (Thurgau Institute of Economics and University of Konstanz)

Abstract

Using panel regression for the period 1970-2000 the paper analyzes whether globalization has influenced the OECD countries’ social and overall spending as well as their tax rates on labor, consumption and capital. Accounting for potential endogeneity of the regressors, the results show that globalization (measured by an index covering 23 variables) did not generally decrease the leeway for independent economic policy. Globalization even increased implicit tax rates on capital (as calculated by Carey and Rabesona 2002) – a result that is mainly driven by economic integration. However, there seems to be competition over tax rates on capital when data based on legislation as suggested by Devereux and Griffith (2003) is employed. Depending on the method of estimation, increasing social integration also influences policies, while political integration does not matter for economic policy in most specifications.

Suggested Citation

  • Axel Dreher, 2003. "The Influence of Globalization on Taxes and Social Policy – an Empirical Analysis for OECD Countries," Public Economics 0310002, University Library of Munich, Germany, revised 02 Jan 2005.
    • Handle: RePEc:wpa:wuwppe:0310002
    Note: Type of Document - . University of Exeter Discussion Paper in Economics
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    References listed on IDEAS

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    Cited by:

    1. Axel Dreher & Tim Krieger, 2004. "Do gasoline prices converge in a unified Europe with non-harmonized tax rates?," TWI Research Paper Series 2, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    2. Paolo Liberati & Antonio Sciala, 2011. "How economic integration affects the vertical structure of the public sector," Economics of Governance, Springer, vol. 12(4), pages 385-402, December.
    3. Axel Dreher & Tim Krieger, 2010. "Diesel price convergence and mineral oil taxation in Europe," Applied Economics, Taylor & Francis Journals, vol. 42(15), pages 1955-1961.
    4. Christian Bjørnskov & Axel Dreher & Justina Fischer, 2008. "Cross-country determinants of life satisfaction: exploring different determinants across groups in society," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 30(1), pages 119-173, January.
    5. B. Merlevede & G. Rayp & S. Van Parys & T. Verbeke, 2011. "Do EU15 countries compete over labour taxes?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/750, Ghent University, Faculty of Economics and Business Administration.
    6. Axel Dreher & Noel Gaston, 2007. "Has Globalisation Really had no Effect on Unions?," Kyklos, Wiley Blackwell, vol. 60(2), pages 165-186, May.
    7. Ming-Chang Tsai, 2007. "Does globali zation affect human well-being?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 81(1), pages 103-126, March.
    8. Axel Dreher & Noel Gaston, 2008. "Has Globalization Increased Inequality?," Review of International Economics, Wiley Blackwell, vol. 16(3), pages 516-536, August.
    9. CREŢOIU, Raluca Ionela, 2014. "The Complexity Of The Implications Of Globalization In The Context Of The Current Global Economy," Annals of Spiru Haret University, Economic Series, Universitatea Spiru Haret, vol. 5(1), pages 41-49.
    10. Nathalie Chusseau & Michel Dumont, 2013. "Growing Income Inequalities in Advanced Countries," Palgrave Macmillan Books, in: Joël Hellier & Nathalie Chusseau (ed.), Growing Income Inequalities, chapter 1, pages 13-47, Palgrave Macmillan.
    11. Christian Bjørnskov & Axel Dreher & Justina Fischer, 2007. "The bigger the better? Evidence of the effect of government size on life satisfaction around the world," Public Choice, Springer, vol. 130(3), pages 267-292, March.
    12. Antonio SCIALA' & Paolo LIBERATI, 2008. "The Impact of Economic Openness on the Vertical Structure of the Public Sector," EcoMod2008 23800129, EcoMod.

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    More about this item

    Keywords

    globalization; economic policy; government expenditure; social spending; implicit tax rates; dynamic panel; tax competition;
    All these keywords.

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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