It is widely perceived that globalization is a threat to tax financed public sector activities. The argument is that public activities (public consumption and transfers) financed by income taxes distort labour markets and cause higher wages and thus a loss of competitiveness. Since this link is...

The marginal costs based representation of firm productivity in the Melitz [Melitz, M.J., 2003. The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica 71 (6), 1695-1725] model, predicts positive exporter productivity premia. We show that this...