Aggregate scale economies, market integration, and optimal welfare state policy

• 成果类型: Article; Proceedings Paper
• 署名作者: Molana, Hassan; Montagna, Catia
• 署名单位: University of Dundee; University of Nottingham
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2005.06.012
• 发表日期: 2006
• 页码: 321-340
• 关键词: circular causation; international trade; capital mobility; optimal policy; Welfare state

摘要

Using a two-sector-two-country model with aggregate scale economies and unionisation, we show that optimal welfare state policy entails positive levels of unemployment 'benefits under free-trade and capital mobility. In this setting, economic integration does not reduce the revenue raising capacity of governments and thus does not lead to a race-to-the-bottom in social standards. Instead, trade and capital flows interact with welfare state policies in increasing welfare even when each government acts independently (non-cooperatively) in determining its optimal welfare payment. Cooperation is shown to improve upon non-cooperative outcomes by raising both the generosity of the welfare state and aggregate welfare. (c) 2005 Elsevier B.V. All rights reserved.