Globalisation and the funding sustainability of the OECD welfare state

Abstract

Without any doubt, the relationship globalisation has with the welfare state size is a very controversial topic, especially after the 80ties, when globalisation took the high road and started drastically changing the world economies, policies and industries. Opening the economies, means opening them up to external pressures, generally and when it comes to wages, taxes and social expenditures. In many OECD countries, the welfare state is perceived as a main cause for the ineffectiveness of the economies, and as a disabler of the postulate of free market. But, these points of view, do not decrease the important role the welfare state actually has. The only thing they can actually change, in this constant fight for higher profits, is to affect the size the welfare states have, both on the sides of the revenues and expenditures. In this article we detect a negative relationship among globalisation and two types of tax revenues: tax on property and tax on payroll in the OECD for the observed period from 1980 to 2017. On the expenditure side, we detect a negative relationship among globalisation and the health expenditures. We as well find a present convergence of the welfare state sizes on the sample of the OECD countries. That is why, in the last part of this article, we overview the convergence in the European Union and the rest of the OECD countries.