Working Paper: CEPR ID: DP17694
Authors: Assaf Razin
Abstract: Which income group is pro‐globalization or anti‐globalization—the wealthy skilled‐labor or the poor low‐skilled labor? How globalization affect income‐based attitudes towards globalization? The paper addresses these issues in the framework of a small open economy which trades in goods and financial securities with the rest of the world. Income‐based political cleavages analyzedare grounded on trade‐related and macro‐related fundamentals, familiar from a standard open‐economy model. They are: (i) The degree of trade border frictions, (ii) The degree of international finance frictions, (iii) The relative factor abundance that determines the capital intensity of the country’s exports; And, (iv) The domestic savings and productivity of domestic investment, which determines whether the country is a financial capital exporter or importer.
Keywords: antiglobalization; financial globalization
JEL Codes: F00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| wealthy skilled labor (J24) | pro-globalization (F69) |
| trade globalization (F69) | income distribution (skilled-rich benefit, unskilled-poor suffer) (D31) |
| income class (D31) | tax policy (H20) |
| tax policy (H20) | provision of social benefits (H55) |
| trade globalization (F69) | tax burden shift (H22) |
| tax burden shift (H22) | income distribution (D31) |
| trade globalization (F69) | welfare state provision (I38) |