Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/21130
Authors: 
Andersen, Torben M.
Year of Publication: 
2001
Series/Report no.: 
IZA Discussion paper series 278
Abstract: 
How will international integration affect welfare policies? This paper considers the possibilities of financing public sector activities (public consumption and social security expenses) by general (wage) taxation in an economy which becomes more integrated in international product markets. Even if labour is internationally immobile, the increased mobility of products and hence jobs implies a change in the distortions arising from taxes and social security contributions levied on labour income. Since financing of social security via general taxation involves a negative externality the effects of international integration depend critically on the institutional structure of the labour market. This paper shows that increased international integration inducing more product market competition implies that it becomes more costly to maintain welfare systems financed by general taxation.
Subjects: 
Product market integration
tax distortions
social security
and public consumption
JEL: 
J30
H30
H20
F10
Document Type: 
Working Paper

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