Economic Interdependencies and Social Expenditures Revisited

AbstractDriving the third wave of globalisation, foreign direct investments (FDI) gained momentum since the mid-1980s. Given that FDIs are unevenly distributed across the globe, this chapter reviews the globalist perspective that an internationalisation of the economy threatens the welfare state. We confront it with descriptive statistics, looking at FDIs and public social expenditure in 70 countries from 1995 to 2015. Our tentative results suggest that different modes of market integration—whether a country is a net recipient or sender of FDIs—trigger two processes: rich countries with a surplus of outward stocks rather compensate their citizens whereas FDI inward stocks help less developed countries to grow and fund social policies.