Globalization and the Welfare State

Fears of job losses and of increasing inequality play a dominant role in current debates on how globalization is affecting our economies. By creating complex and changing patterns of winners and losers, globalization also creates powerful challenges to welfare states, with their objectives of providing social security, redistribution and life cycle transfers. The research area (RA) identifies these challenges and explores ways and means of how welfare states can optimally respond to them.

Our research focuses on, but is not restricted to, the challenges that globalization poses for the labor market. In particular, the RA analyzes and proposes policy responses that enhance people’s adaptability on the labor market and spread the benefits of globalization more equally in society. A second focus is on the challenges and opportunities that globalization creates for health care.

The RA blends insights from international trade, labor economics, and macroeconomics to offer a global perspective on the welfare state. At the same time, the RA explicitly accounts for the behavioral effects of welfare policies at the individual level. To enhance our understanding of what drives economic decisions of individuals, our research integrates insights from behavioral economics with neo-classical economic theory. We complement our theoretical analysis by empirical studies that use both field and experimental data.