Globalisation and the welfare state : more inequality – less redistribution?

Abstract

This paper considers the possible connection between globalisation and inequality in Western welfare states. There are a number of theoretical reasons why increased trade and factor mobility should lead to more inequality in rich countries. At the same time, there are arguments why globalisation should also make it more difficult to redistribute incomes in favour of low- income groups, and this squeeze would seem to lead to severe difficulties for traditional welfare state policies. However, the empirical evidence for such a squeeze varies considerably between countries, and it is suggested that a richer framework than the standard competitive model is needed to understand the forces at work.