Working Paper: NBER ID: w8747
Authors: Hanswerner Sinn
Abstract: While the old systems competition took place with closed borders, globalisation has brought about a new type of systems competition that is driven by the mobility of factors of production. The new systems competition will likely imply the erosion of the European welfare state, induce a race to the bottom in the sense that capital will not even pay for the infrastructure it uses and erode national regulatory systems. In general, it will suffer from the same type of market failure which induced the respective government activity in the first place. The new systems competition will force inefficient governments to seek national efficiency, but national efficiency does not imply that systems competition will itself be efficient.
Keywords: systems competition; globalization; welfare state; capital mobility
JEL Codes: G1; H7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Mobility of capital (F20) | Changes in government policies (O24) |
| Changes in government policies (O24) | Welfare state (I38) |
| Mobility of capital (F20) | Welfare state (I38) |
| Government efficiency (H11) | Capital mobility (F20) |