Globalization

Abstract

The question if globalization does hinder a greater tax effort and thereby more generous social activities by the governments of developing countries, was often answered in the affirmative. In this article I will demonstrate that globalization - measured in the usual way - does not undermine tax capacity or more ambitious welfare efforts in the Global South on average. Therefore, the traditional efficiency thesis can be rejected. The compensation thesis, however, does not fare much better. Both approaches neglect, how adequate traditional social arrangements, set up during the phase of more closed economies and sheltering a small share of workers in the formal sector, are capable of protecting people with non-standard employment and/or in the growing informal sector. Universal, basic income schemes may be more suitable in the new world of work.