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Abstract:
Abstract. The prevailing but not unchallenged ‘conventional wisdom’ in the literature
dealing with the impact of globalisation on public spending is that the effects of increased
openness can be compensated through the welfare state. Repeatedly, studies have found
little evidence for a ‘race to the bottom’ in taxation or spending. This research note
shows that it is premature to conclude that globalisation has no negative impact on public
spending. By extending the period of observation into the 2000s, by looking at changes in
openness and spending instead of their levels, and by disentangling the effects of openness
in the cross-sectional and over-time dimensions of variation, this article shows that the
association between increased openness and spending is clearly negative. Although the
contribution of this research note is mainly empirical, some theoretical arguments are
presented, emphasising the long-term nature and complexity of policy making in the politics
of globalisation.
