Globalization and the crisis of embedded liberalism: The role of domestic political institutions

Economic globalization presents governments with a serious dilemma: it increases the political demands on them to provide insurance, redistribute income, and manage the economy at the same time that it undermines their ability to do all of these things. In this dissertation, I examine how domestic political institutions mediate these globalization pressures, and thus, how institutions affect the nature of globalization politics within nations. The dissertation focuses mostly on the consequences of globalization for tax policy and is motivated by a puzzling empirical observation: Countries with majoritarian-pluralist political institutions tax capital income at a higher rate relative to labor income than their consensual-corporatist counterparts.;I combine game-theoretic modeling, quantitative analysis of both macroeconomic panels and Eurobarometer surveys, and comparative case studies to accomplish three separate tasks. The first task of the dissertation is to explain the empirical tax puzzle. I argue that the consensual political institutions present in most corporatist countries account for their surprisingly low tax rates on capital income and demonstrate the importance of electoral systems in accounting for the nature of British and Dutch tax reform in the 1980s and 1990s. The second task of the dissertation is to assess the consequences of these tax policy differences in terms of public support for economic openness among workers. I find that relatively high labor tax rates reduce support for economic openness. However, because levels of public spending are much higher in the consensual-corporatist countries, support for economic openness is stronger among workers in these countries despite the high labor tax burden. The final task of the dissertation is to consider how domestic political institutions affect the political viability and policy influence of anti-globalization backlashes. I argue the impact of domestic political institutions is significant and show historically that the development of majoritarian democracy in Britain and consensus democracy in Sweden shaped their policy responses to economic globalization in the 19th Century.