Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/171091 
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper No. 6627
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper proposes a stylized model of policy determination and imperfect international integration. A country-specific policy wedge corrects labor market imperfections and/or redistributes welfare across differently wealthy agents. Capital market integration with the rest of the world, indexed by another wedge, shapes the politico-economic equilibrium policy through race-to-the-bottom and beggar-thy-neighbor channels. The policy and welfare implications of tighter international integration depend in sharp and empirically realistic ways on country-specific political and structural features.
Subjects: 
policy competition
capital mobility
JEL: 
F02
D33
J08
Document Type: 
Working Paper
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