Do more open economies have bigger governments? Another look

Garen, John; Trask, Kathleen

doi:10.1016/j.jdeveco.2004.04.002

Cited by 40 publications

(10 citation statements)

References 20 publications

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“…Further, consistent with the literature we find that there are differences in the relationship between openness and government expenditures across different sets of countries. This confirms previous work by Alesina and Warcziarg (1998), Epifani and Gancia (2009), Garen and Trask (2005), Hanslin (2010), who have concluded that there are differences between groups of countries; in particular, between low-income and high-income countries.…”

Section: Imports and Exportssupporting

confidence: 91%

“…Similar to the current study, Garen and Trask (2005) consider the influence of differential levels of income on the relationship between openness and government size. They find that "poor and rich countries have different institutions and it is worthwhile to examine inter-relationships with a country"s income" (p. 542).…”

Section: Data Sources and Summary Statisticsmentioning

confidence: 97%

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The Impact of Imports and Exports on the Size and Composition of Government Expenditures

Benarroch¹,

Pandey²

2017

IJEF

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This paper examines the casual relationship between greater exposure to international trade and the size and composition of government expenditures, productive versus unproductive. To capture differential impacts on how government responds to greater international exposure three measures are used: the ratio of exports plus imports to GDP (openness), the ratio of exports to GDP, and the ratio imports to GDP. For all countries in aggregate, we find no causal relationship between openness and total government expenditures or productive and unproductive expenditures. For low-income countries however, there is a positive causal relationship between openness and productive government expenditures. Further, there is a positive causal relationship between the import ratio and productive expenditures for all countries as well as for low-and high-income countries separately. Exports, conversely, have no causal relationship with any measure of government expenditures. Our findings suggest that governments in economies with greater imports as a share of GDP increase productive expenditure to counteract the negative consequences from more exposure to foreign competition.

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Section: Imports and Exportssupporting

confidence: 91%

Section: Data Sources and Summary Statisticsmentioning

confidence: 97%

The Impact of Imports and Exports on the Size and Composition of Government Expenditures

Benarroch¹,

Pandey²

2017

IJEF

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“…1 1 Other studies investigating specifically the correlation between openness and government size include Alesina and Wacziarg (1998), the UN (2001) World Public Sector Report, Garrett (2001), Islam (2004) and Garen and Trask (2005). Some authors are sceptical about the robustness of this empirical regularity.…”

mentioning

confidence: 99%

Openness, Government Size and the Terms of Trade

Epifani

Gancia

2009

Review of Economic Studies

127

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This paper investigates the relationship between trade openness and the size of governments, both theoretically and empirically. We argue that openness can increase the size of governments through two channels: (1) a terms of trade externality, whereby trade lowers the domestic cost of taxation, and (2) the demand for insurance, whereby trade raises risk and public transfers. We provide a uni…ed framework for studying and testing these two mechanisms. Our main theoretical prediction is that the relative strength of the two explanations depends on a key parameter, namely, the elasticity of substitution between domestic and foreign goods. Moreover, while the …rst mechanism is ine¢ cient from the standpoint of world welfare, the second is instead optimal. In the empirical part of the paper, we provide new evidence on the positive association between openness and government size and we explore its determinants. Consistently with the terms of trade externality channel, we show that the correlation is contingent on a low elasticity of substitution between domestic and foreign goods. Our …ndings raise warnings that globalization may have led to ine¢ ciently large governments.JEL Classi…cation: F1, H1

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“…Islam (2004) found that the relationship between openness and government size is positive in Canada, the UK, Norway and Sweden, but negative in the US and Australia. Garen and Trask (2005) found that the more the economy is open, the smaller the government size becomes. Ram (2009) estimated several models from 41-year panel data in over 150 countries and found that, when cross-country heterogeneity is taken into consideration, there is a negative association between openness and government size.…”

Section: Other Factors Possibly Influencing Local Government Sizementioning

confidence: 99%

Fiscal Decentralization, Budgetary Transparency, and Local Government Size in China

Zhang

2016

Emerging Markets Finance and Trade

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This article makes use of panel data for 31 provinces between 1985 and 2010 and specifies a dynamic panel model to investigate the determinants of local government size in China and achieved several conclusions: (1) the fiscal decentralization since TSS reform in 1994 has increased the local government size; (2) budgetary transparency has a U-shape nonlinear effect on local government size; (3) fiscal revenue is the important factor to drive the overexpansion of local government size in China; and (4) local government size has a strong dependence of past path.

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Do more open economies have bigger governments? Another look

Cited by 40 publications

References 20 publications

The Impact of Imports and Exports on the Size and Composition of Government Expenditures

The Impact of Imports and Exports on the Size and Composition of Government Expenditures

Openness, Government Size and the Terms of Trade

Fiscal Decentralization, Budgetary Transparency, and Local Government Size in China

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